371–380 of 586 posts
Earlier quoted context omitted.
The lack of auto filing is not the core issue with our tax code. The ridiculous complexity is. I want auto filing but the tax code could be drastically simplified without the government directly competing with TurboTax.
Elsewhere in one of their filings, it also says "Simplification of the tax code." I'm totally fine blaming them.
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 -…
Exactly what everyone should do. If someone is obsessed with these kind of topics I think he should start his own startup and be a founder/co-founder.
Earlier quoted context omitted.
>I specifically asked if our options would be diluted in the next fundraising round I guess I don't understand what motivated you to ask about dilution and then believing a promise of no dilution since you're supposed to get diluted over time as the startup reaches maturity. Everybody is supposed to get diluted. If a founder promised me "no dilution", I'd have to conclude either... 1) he doesn't understand the mathem…
Because it was my first startup and despite days of research into how options work, I clearly still didn't understand it all. So I trusted his answer. I had no previous experience or knowledge that would have led me to believe that they wouldn't follow through with the promise to grant additional options over time.
If you were to have some kind of special 'non dilution' clause in your equity position (which by the way, no founder would reasonably agree to), then you should have it in writing.
But it's moot. One or both of you was obviously struggling with how all of that worked, because giving employees anti-ratcheting clauses is not something that should really be done. In fact, it should be avoided if at all possible even with investors.
Really surprised how few people know about this legislation to fix the tax laws that cause one of the biggest issues with options. https://www.gop.gov/better-way-startups/ It made it through the house and was approved by senate finance committee but is now stuck in a bill about retirement savings legislation. Even finding information about the bill on the web or twitter is incredibly difficult. Please tweet, blog, et…
So, the devil here is in the details: https://www.congress.gov/bill/114th-congress/house-bill/5719
The tax bill will come due when the employee leaves the company; so this doesn't really help a lot.
Has a few caveats that make it inapplicable to early employees too.
Interestingly, it seems like it applies to stock, not just options, which if it didn't come due when you left the company, would be great since it would mean that startups could stop dicking around with options for tax reasons and just issue RSUs.
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I was of the impression that typically a portion of your RSUs are used to handle the income tax from receiving them immediately, so you simply receive less RSUs as opposed to the full amount plus a big initial tax bill. That seems to me like a good way to offset the risk that the RSUs could be worthless in the future.
Yes, the company issuing the RSU's must pay the taxes for you. They do that by selling a portion of the shares to cover the tax (which at least where I've been works out to a bit above 40%).
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It's not just "aren't IPO-ing" - the rapid sale described is often banned today under agreements where shares can't be offloaded for a certain period after the IPO, so that the banks backing the offering can make their money.
That's pretty crappy. Another way to prevent anyone but the founders and investors from capturing any value from the IPO. Instead of selling your shares right after the IPO, couldn't you trade options on those shares in a way that closely simulates selling the underlying equity, and stay within the agreement?
Should have been titled "... in the USA" as tax rules are very different in other countries. For instance, in France, you only owe money to the taxperson when you sell your shares, for a profit. If you sell for a loss, this is tax-deducible.
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…
The canada gotcha's are:
1. Everything is more expensive.
2. Housing is overpriced in employement metros except alberta.
3. You get paid a lot less than the USA anyway.
4. Canada's stock market is pretty much flat compared to the USA in the past decade.
Sometimes just raw amounts of money overcomes a lot of these kinds of issues.
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 -…
This advice is often given but it's easier said than done. Let's say you work at a unicorn for 3 years and in that time it goes up 10x in VC fantasy land valuation. On paper you have a lot of money and the company reasonably might go public a couple years after you leave. Let's say you're granted about a year's salary in shares when you first join so you've vested $100K for a round number. When you leave that equity…
If you aren't at the company, it will be extremely ordinary for some funding event to dilute you to nothing. And you will have absolutely no say in the matter, because you're an outsider who, and this will be a direct quote, "isn't moving the company forward."
What's the better option to motivate employees then? Profit-sharing rather than equity?
Should have been titled "... in the USA" as tax rules are very different in other countries. For instance, in France, you only owe money to the taxperson when you sell your shares, for a profit. If you sell for a loss, this is tax-deducible.