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You would in the stock agreement, remove terms about how the stock expires after you stop working for the company. They would become NSO stock options. What d
by mahyarm 13y ago
You would in the stock agreement, remove terms about how the stock expires after you stop working for the company. They would become NSO stock options.
What different tax problems would they have with people exercising later? How is it different from employees exercising their stock after vesting?
Unless your saying the entire structure is made to give people an incentive to not actually take their stock if they leave the company before a liquidity event to help avoid that 2000 shareholder stock limit?
What I'm talking about is mainly about non-liquid companies. The problems mostly go away with liquid companies.
- prostoalex 13y agoIt's the IRS rule, not a company rule. I'm not super-clear what motivated IRS decision http://www.mystockoptions.com/faq/index.cfm/catID/36274DB1-D3C4-4D93-B57E8FA2916B9477/objectID/F1E4EDF6-2B05-452D-9AFD3FB64A55AE1E http://www.mystockoptions.com/faq/index.cfm/catID/36274DB1-D...
- mahyarm 13y agoThat is why I say they would offer them as NQSO stock options. Not ISO stock options. I would never need to actually exercise the stock options if I can never sell the things profitably anyway. I can even wait a while until after an IPO theoretically to wait and avoid a dot com bubble AMT nightmare that happened in the early 2000s. When I can actually sell the options, then the price of about %5 extra in taxes (short term vs long term capital gains) is small compared to the taxation paperwork and paying for stock that has a good chance of being worthless. If a company is liquid or soon to be liquid when I start working for them, then the extra bonus treatment of ISOs is fine and I understand putting that limit inside there, because the stock isn't worthless and I can sell it when I leave the company.