Handcuffed to Uber • Hacker News Board

Re: Handcuffed to Uber

#151

Post by cplease » Mon, May 02, 2016, 2:14 AM UTC

redshirtrob wrote: post #99

xiaoma wrote: post #56

> Not only does it not allow employees to sell their shares to secondary buyers, it also won’t allow them to use services like those offered by 137 Ventures, which makes loans to founders and early employees using their stock as collateral. (Snapchat, Dropbox, and Airbnb have similar policies.) Does keeping early employees "handcuffed" essentially as indentured servants until IPO align with YC's ethics policy?

Sam Altman has commented on this before. Among other things, he advocates for much longer (10 years) exercise periods for equity grants.[0] He also discusses the need for a change in tax treatment by the IRS. One of the fundamental issues is how options are taxed. Should you exercise an option, you will need to pay taxes on the spread (delta of strike price and current FMV, i.e. latest 409A valuation). In many cases,…

If the spread is nonexistent, why exercise at all? Why not just dump your money in an index fund?

Re: Handcuffed to Uber

#152

Post by scurvy » Mon, May 02, 2016, 2:15 AM UTC

throwaway_exer wrote: post #143

scurvy wrote: post #41

One thing to keep in mind is that you might not have until next April 15th to pay your taxes after exercise. If the exercise benefit is large enough compared to your typical income, you might owe estimated taxes that quarter.

The IRS will say that you "owe" quarterly, but there's no penalty for not doing so.

It's a 3% penalty on the difference between what you owe and what you've paid. It's a pretty minor amount, but there is a penalty.

http://www.inman.com/2012/06/08/dont-sweat-quarterly-tax-dea...

Re: Handcuffed to Uber

#153

Post by beambot » Mon, May 02, 2016, 2:22 AM UTC

cplease wrote: post #151

redshirtrob wrote: post #99

Earlier quoted context omitted.

Sam Altman has commented on this before. Among other things, he advocates for much longer (10 years) exercise periods for equity grants.[0] He also discusses the need for a change in tax treatment by the IRS. One of the fundamental issues is how options are taxed. Should you exercise an option, you will need to pay taxes on the spread (delta of strike price and current FMV, i.e. latest 409A valuation). In many cases,…

If the spread is nonexistent, why exercise at all? Why not just dump your money in an index fund?

So that you can get restricted stock in the startup you worked at for no out of pocket expense...?

Re: Handcuffed to Uber

#154

Post by ismail » Mon, May 02, 2016, 2:36 AM UTC

I am not familiar with american tax law, why do you need to pay tax on buying share options? The reasoning behind this law?

We have capital gains tax which i believe is only taxed on sale of the shares.

Re: Handcuffed to Uber

#155

Post by schrodinger » Mon, May 02, 2016, 2:40 AM UTC

ismail wrote: post #154

I am not familiar with american tax law, why do you need to pay tax on buying share options? The reasoning behind this law? We have capital gains tax which i believe is only taxed on sale of the shares.

When you exercise an option, you are paying the strike price for something that may be worth more. For example, you may have an option with a strike price of $1, but the shares are currently worth $10. That $9 is considered taxable income.

Re: Handcuffed to Uber

#156

Post by throwaway12358 » Mon, May 02, 2016, 3:03 AM UTC

URSpider94 wrote: post #96

DannyBee wrote: post #74

Earlier quoted context omitted.

RSU's are sold at vest to cover taxes.

But if Uber isn't yet public, and won't allow a market in its shares, who would one sell the shares TO to cover the tax?

Uber's RSUs have both a time condition and a "Uber goes public/Uber gets acquired" condition before they can vest.

Re: Handcuffed to Uber

#157

Post by prklmn » Mon, May 02, 2016, 3:07 AM UTC

xiaoma wrote: post #75

ploxiln wrote: post #72

Earlier quoted context omitted.

"indentured servants"? That's ridiculous - startup tech workers are paid well compared to the average person, and they face no financial penalties for leaving their jobs if they do not exercise their stock options. They do face the gnawing possibility that they could be rich , if only they could sell immediately, or keep the options for later, or or or ... if only! But they can always just find another reasonably int…

You disagree in terms of diction. It was an analogy, after all. History doesn't repeat itself. It rhymes. Do you actually support the practice from an ethical standpoint? Employees are recruited to start-ups with equity. That's a core part of their compensation for their work (for which they likely could have received more salary from Google, Amazon, Facebook, etc). Then after they've already done the work , that com…

This behavior is absolutely ethical. They have done some work, not all the work as you have implied. Part of the basis of paying employees with options is so that they stick around - early employees know this when excepting this form of payment. This is the small price they are paying for getting rich later.

Re: Handcuffed to Uber

#158

Post by refurb » Mon, May 02, 2016, 3:11 AM UTC

xiaoma wrote: post #56

> Not only does it not allow employees to sell their shares to secondary buyers, it also won’t allow them to use services like those offered by 137 Ventures, which makes loans to founders and early employees using their stock as collateral. (Snapchat, Dropbox, and Airbnb have similar policies.) Does keeping early employees "handcuffed" essentially as indentured servants until IPO align with YC's ethics policy?

indentured servants

Wow that phrase has really lost its meaning lately.

Re: Handcuffed to Uber

#159

Post by bps4484 » Mon, May 02, 2016, 3:13 AM UTC

cplease wrote: post #151

redshirtrob wrote: post #99

Earlier quoted context omitted.

Sam Altman has commented on this before. Among other things, he advocates for much longer (10 years) exercise periods for equity grants.[0] He also discusses the need for a change in tax treatment by the IRS. One of the fundamental issues is how options are taxed. Should you exercise an option, you will need to pay taxes on the spread (delta of strike price and current FMV, i.e. latest 409A valuation). In many cases,…

If the spread is nonexistent, why exercise at all? Why not just dump your money in an index fund?

It may be that a company has done very well but hasn't raised more money to bump up the present market value of the stock. In this case you would want to exercise early so that the clock starts for capital gains in the event of liquidity.

Re: Handcuffed to Uber

#160

Post by jbrukh » Mon, May 02, 2016, 3:22 AM UTC

argonaut wrote: post #146

jbrukh wrote: post #132

Earlier quoted context omitted.

Sorry, my fault for not being clear. I didn't mean that digital equity would empower employees to circumvent company policies. Rather digital equity and governance systems [1] that are currently being built around blockchain and decentralized projects simply take a much more egalitarian and healthy approach to distributing ownership in the first place. And, hey, if you want to use equity as an incentive for retaining…

The existence of a distributed ownership mechanism isn't going to convince companies to use that mechanism. Honestly, the best way to decentralize ownership is to lead by example and start a hundred-billion dollar company that distributes ownership. If the next Google has decentralized ownership, that would be a model for other companies to follow. Right now, there is no incentive for any company to do anything nontr…

That's what I'm saying. The next generation of companies will have all of the tools and technologies to enable that distributed ownership. It's early days, but "decentralized Uber" Arcade City is doing precisely that.