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What I Wish I'd Known About Equity Before Joining a Unicorn

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Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#121

Post by tdiggity »

jMyles wrote: post #30

> Your options have a strike price and private companies generally have a 409A valuation to determine their fair market value. Is this exactly accurate? My understanding was that you owe gains tax on the difference between the 409A and (strike price + wages traded for options). In other words, if you take a $1000 / month cut for one year in exchange for options, you get to add $12,000 to your cost basis for the purpo…

Salary doesn't come into play when calculating gains taxes in the USA.

In other words, the article has it correct.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#122

Post by JonFish85 »

jaymzcampbell wrote: post #101
JonFish85 wrote: post #79

Earlier quoted context omitted.

>> I cannot imagine having enough liquid assets to be happy to risk $100k like that $100k isn't much money. If you've taken stock in lieu of $15-$20k/yr salary, $100k is pretty easy to make up (especially considering that many bigger, established companies also pay bonuses and have a better structure for vacation and such). >> anything but the Uber or AirBnBs of this world Personally those are ones I'd be really, rea…

> $100k isn't much money. If you've taken stock in lieu of $15-$20k/yr salary, $100k is pretty easy to make up (especially considering that many bigger, established companies also pay bonuses and have a better structure for vacation and such). I'm not sure I follow. If I agree to be underpaid by $20k a year say then I'm not sure how I'd then on reduced salary save up $100k after tax and to the extent I wouldn't "miss…

Nope, I think I mis-understood what you were saying :) I thought you had said "risk $100k" meaning $100k worth of on-paper gains, not $100k of cash to gamble on stock. My mistake!

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#123

Post by maverick_iceman »

jaymzcampbell wrote: post #5

As always the main rule you need to live by is value the equity at zero and you'll be (maybe) happy. Short of being a founder (and thus not really being offered equity) I have never treated these things as anything beyond a minor on paper "bonus". Given you'd be lucky to get anything more than 1% even as a first employee I find them next to worthless as early stage motivators. Which is how everyone seems to play it -…

Assuming equity is worthless the base salary has to be north of 200K to match the market rate (for low level software engineers) for public tech companies. In most Unicorns that's definitely not the case. In fact when I interviewed for Uber they explicitly said that their base salary is low compared to Google/FB but they make it up in equity.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#124

Post by cbr »

ryanbrunner wrote: post #48
chris_7 wrote: post #19

> fixed PTO Why on earth is this a downside? "Unlimited vacation" is a scam.

IMO, the amount of vacation you're actually permitted to take culturally is completely orthogonal to the vacation policy. I've worked in places with a fixed # of vacation days where it was absolutely unacceptable to actually take those days.

At least in that case you get the days paid out when you leave.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#126

Post by compuguy »

dj-wonk wrote: post #73
equalarrow wrote: post #8

Great post and I totally agree. I recently talked to my financial advisor about my current company and we went through all the numbers for various pricing scenarios (of a public offering) over the next 4-6 year, at various valuations. From his point of view, he encourages me to stay the course - quite the opposite from most of the tech friends I know (most usually don't stick around after a few years). On a side note…

I'd highly recommend checking out alternatives. The one that impressed me (for a particular situation) the most recently is Clubhouse. Compare based on your needs. Enterprise needs with established products are not the same as a startup, as you know or will soon.

Until these alternatives have self hosted options, most companies are not going to use them.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#127

Post by hedora »

jMyles wrote: post #30

> Your options have a strike price and private companies generally have a 409A valuation to determine their fair market value. Is this exactly accurate? My understanding was that you owe gains tax on the difference between the 409A and (strike price + wages traded for options). In other words, if you take a $1000 / month cut for one year in exchange for options, you get to add $12,000 to your cost basis for the purpo…

I have never heard of using salary to buy options instead of just having a fixed salary and fixed options package.

This sounds like it might be a way to dodge the taxman (but you paid income tax on the $1000/month, so maybe not), or maybe your employer is trying an experiment with compensation packages.

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#128

Post by [deleted] »

dpark wrote: post #99
battlebot wrote: post #51

Earlier quoted context omitted.

We citizens have very little say in the machinery. That is the biggest problem we face these days. Regular people have no agency at all and there is a sneering elite that runs things from the coasts who believe everyone else is a sheep to be sheared for them.

More than half the population lives on the coasts. Most of them are "regular people", too. The problem with our tax code is the same as the problem with the rest of our laws: pandering politicians push through complex and expensive trash because it makes either their constituents or their donors happy. For taxes specifically, normal people have complex taxes because of the dozens of deductions and credits that hide t…

[deleted]

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#129

Post by brndnmtthws »

BrandonM wrote: post #105
roadnottaken wrote: post #93

Earlier quoted context omitted.

Yes, but for ISO you owe AMT. It amounts to ~28% federal tax rather than ~39%. But it's still a big number.

This is correct. To put some concrete numbers on it, I'm in my 6th year at a startup. In 2016, I spent $6,400 to exercise ~50,000 options that had a total FMV of ~$60,000. This is going to add over $7,000 to my 2016 taxes due to AMT. If you're single and your income is over $115K, or if you're married and your total income is over $150K, there will be tax implications for exercising your options, unless you exercise…

That's not quite how AMT works. AMT is not added to your taxes, it's an entirely alternative tax system (hence the A in AMT). You'll pay the larger of the two values (AMT vs ordinary tax), and given the taxation rates, you may not have made enough to actually trigger AMT. The rate for AMT is lower than ordinary tax, and there's an exemption for the first $N (where N varies based on several factors).

Re: What I Wish I'd Known About Equity Before Joining a Unicorn

#130

Post by nerfhammer »

battlebot wrote: post #51
Someone1234 wrote: post #20

Earlier quoted context omitted.

The US really does have a lot of problems with their tax system to be honest. For a country whose citizens outwardly hate tax, you'd think they would have one of the best, most straightforward, and fair tax systems in the world. But instead you have one of the most convoluted, loopholey, broken systems in the world. Whereas in countries where taxes aren't as "hated" (Europe, Canada, etc) they don't pay a cent to file…

We citizens have very little say in the machinery. That is the biggest problem we face these days. Regular people have no agency at all and there is a sneering elite that runs things from the coasts who believe everyone else is a sheep to be sheared for them.

Bollocks. Less populated states have vastly higher federal legislative representation per capita.
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