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I'm hung up on the fact that you are exercising your options. Why? If the options are set to expire that quickly then something else is amiss as well. Generally

by josho 12y ago

I'm hung up on the fact that you are exercising your options. Why? If the options are set to expire that quickly then something else is amiss as well. Generally you exercise options only when you intend to sell or leave the company and would lose those options. From what you described, you gave no reason for exercising the options. I'd speak with the founders and enquire why they never executed the agreement, that is the raise that was conditional on getting funded. From a contract point of you, you should be eligible to receive that money. From a trust point of view you can no longer trust these individuals. Without trust in a small organization I don't see the point in sticking around.

hijinks 12y ago
My guess is he's young or this is one of his first early stage startups. The amount of people I know that were employee #1-3 and exercised all there options cause they were cheap and then found out about capital gains they owed I can count on 3 hands if I had them.
late2part 12y ago
Your assumption is incorrect regarding the reasons for exercising options. Early exercise of options often garners positive tax benefits for the optionee.
- josho 12y ago
  That's a good point. What I left unstated, and what I was wondering was if this individual was given guidance by the founders to exercise his options. Thereby effectively reducing his salary further, when he already stated that his salary was an issue of contention. Something I'd be guarded about. However, you are right, if this company succeeds, he saves some money on taxes by owning stock early.
- OmarIsmail 12y ago
  I believe this is different in Canada. i.e. The "clock" starts when the options are granted and not when the options are exercised.
mdonohue 12y ago
He was exercising options because it is very cheap and he thought it had no tax impact. This also starts the clock on long term capital gains rules. It makes sense for early stage companies. You might be thinking of this for more established companies where the exercise might require tens or hundreds of thousands of dollars. That's a very different situation.

by josho 12y ago

hijinks 12y ago

My guess is he's young or this is one of his first early stage startups. The amount of people I know that were employee #1-3 and exercised all there options cause they were cheap and then found out about capital gains they owed I can count on 3 hands if I had them.

late2part 12y ago

Your assumption is incorrect regarding the reasons for exercising options. Early exercise of options often garners positive tax benefits for the optionee.

josho 12y ago
That's a good point. What I left unstated, and what I was wondering was if this individual was given guidance by the founders to exercise his options. Thereby effectively reducing his salary further, when he already stated that his salary was an issue of contention. Something I'd be guarded about. However, you are right, if this company succeeds, he saves some money on taxes by owning stock early.
OmarIsmail 12y ago
I believe this is different in Canada. i.e. The "clock" starts when the options are granted and not when the options are exercised.

mdonohue 12y ago

He was exercising options because it is very cheap and he thought it had no tax impact. This also starts the clock on long term capital gains rules. It makes sense for early stage companies. You might be thinking of this for more established companies where the exercise might require tens or hundreds of thousands of dollars. That's a very different situation.