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This is why it’s so crucial to do double trigger vesting.
https://www.ft.com/content/9b6981cf-7444-4057-9791-b40ef1cdb... https://archive.is/2sJfX > In the case of payments group Stripe, RSUs worth millions of dollars will start expiring from 2024 and risk being forfeited unless the company buys them out, changes the terms of the awards or launches an IPO. > Employees face a personal tax liability when RSUs vest. But staff are unable to sell any of these shares without the…
Hardships like taxing illiquid stock is the main reason for only taxing _realized gains_. Since Stripe wants employees to cherish their vested interest in the company, the corporation goes ahead of law here and facilitates. This also means that employees are less likely to either forfeit and sell the stock to third parties. Legislators promoting entrepreneurship may in future encourage this behaviour to strengthen em…
This seems like an over simplification which ignores people’s abilities to still draw cash on their illiquid stock. It’s not hard to imagine that early employees with millions in stock can take a loan against them, or they can sell their shares on the secondary markets too. This is especially true for Stripe.
The idea of taxing only realized gains is why we have problems like prop 13 in California with two neighbors paying radically different property taxes on the same valued homes.
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I am partially gussing here, but... They weren't old enough by 2020/early 2021. Series A was 2012. It's usually 10 years after that you need to IPO. So the expected IPO would be 2022. Bad timing/luck. Similar for those option plans. Planned IPO +2 years should OK. Unless it hits you like the last 2 years.
Can you provide specific data points and examples for this 10 year hypothesis?
Around year 2000 median age was 4 years, 2001-2009 was 8-9 years and since 2008 median age has been 9-14 years with the majority more than 10 years.
Earlier quoted context omitted.
Hardships like taxing illiquid stock is the main reason for only taxing _realized gains_. Since Stripe wants employees to cherish their vested interest in the company, the corporation goes ahead of law here and facilitates. This also means that employees are less likely to either forfeit and sell the stock to third parties. Legislators promoting entrepreneurship may in future encourage this behaviour to strengthen em…
> Hardships like taxing illiquid stock is the main reason for only taxing _realized gains_. This seems like an over simplification which ignores people’s abilities to still draw cash on their illiquid stock. It’s not hard to imagine that early employees with millions in stock can take a loan against them, or they can sell their shares on the secondary markets too. This is especially true for Stripe. The idea of taxin…
Cite the asset as an illiquid, fully-contained asset, have the taxes accumulate as a debt against the asset, and then owe all the taxes at sale time.
Earlier quoted context omitted.
> Hardships like taxing illiquid stock is the main reason for only taxing _realized gains_. This seems like an over simplification which ignores people’s abilities to still draw cash on their illiquid stock. It’s not hard to imagine that early employees with millions in stock can take a loan against them, or they can sell their shares on the secondary markets too. This is especially true for Stripe. The idea of taxin…
Maybe the same good solutions could apply to both unrealized gains and prop 13. Cite the asset as an illiquid, fully-contained asset, have the taxes accumulate as a debt against the asset, and then owe all the taxes at sale time.
I think there’s other issues too like how property taxes accumulate and can surpass the value of the home in which case you do what?
0: https://taxfoundation.org/state-property-taxes-reliance-2021...
Idk about the tax but this probably a relatively easy raise, it's only not debt because they don't want to carry that into potential IPO?
From what I heard no such thing as “easy raise” rn
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Essentially we have another story of people being offered equity compensation in a non-public company as though it were real compensation. Now they're even potentially being hit with tax liability for that equity despite having no way to realize the income. This sounds like stripe does not actually have the cash to cover the withholding even then, and if they can't I think that means the employees are getting $X of "…
Frankly, the villain is the tax code.
Earlier quoted context omitted.
They should've IPOed when valuations went into massive bubble territory in 2020/2021... have to wonder what kind of logic they were using to wait so long. If you can IPO at a ~100x sales multiple, what more do you really need? Hard to feel sorry for those that chose to stay private for a decade+ while the getting was good
Same could be said of anyone in tech who held onto vested RSU in 2021/early 2022, which I think is a majority. Greed is human
This is why it’s so crucial to do double trigger vesting.