3 ms·

This may be country-specific, but can options be put in tax-free accounts like TFSAs (Canada), (N)ISAs (UK), or (I think) IRAs (US)? Wouldn't that mitigate the

• SeoxyS 11y ago
  In the US, with enough foresight, they can be purchased through a Roth IRA, which would prevent any tax from being applied. The (major) caveats are three-fold: 1) The money cannot be touched until retirement. So… if it turns out to be Uber and worth hundreds of millions, you can't touch any of it! It's probably a good idea to only put 25-50% of your stock in the account. 2) You can only contribute a tiny amount yearly to an IRA ($6k I think). So, the options strike price must be dirt-cheap for this to make sense. 3) Actually doing it is quite complex, and requires a third-party account custodian. If you're accepting a random startup offer pre-funding (the only time you'd have essentially free options, allowing #2 above not to be an issue), you're unlikely to go through that trouble. -- The huge benefit, however, is that if you do succeed in hitting in big with something that way, you'll have a gigantic Roth IRA balance, tax-free, and you'll be able to use it to make other investments, whose cost basis and profits will all be tax-free. https://www.google.com/?q=max+levchin+paypal+roth+ira https://www.google.com/?q=max+levchin+paypal+roth+ira
  • rdl 11y ago
    Are you talking about a "ROBS" (Rollover As Business Startup) thing? The IRS hates them, but I believe they're technically legal. I wasn't sure if you could do it with a Roth IRA vs. with a (non-Roth) 401k, though.