181–190 of 190 posts
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I have literally never heard of this...
Maybe not in a startup? I have company stock given to me in my 401k. https://www.fidelity.com/viewpoints/personal-finance/company... >More than 15 million people own about $400 billion of company stock in Fidelity-administered workplace retirement plans alone
This -- "One of those former employees paid about $100,000 to exercise more than 20,000 incentive stock options (ISOs), plus a tax bill of over $200,000. The other paid about $70,000 to exercise about 5,000 ISOs, and then about $160,000 in taxes. Both former employees took out loans from family members to make the payments, and requested anonymity to discuss their personal financial situations." Is how many many Sili…
Yeah this just looks like poor/risky financial calculus on the part of the former employees. Also I always incorrectly think that these sorts of option traps are public knowledge, but then every now and then I'm prove wrong by even very smart people I personally know, not being aware of these traps. Not sure how we fix this situation tbh. For starters "don't join a company without an extended option exercise period"…
Poor? That's yet to be seen.
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Maybe not in a startup? I have company stock given to me in my 401k. https://www.fidelity.com/viewpoints/personal-finance/company... >More than 15 million people own about $400 billion of company stock in Fidelity-administered workplace retirement plans alone
Isn't there a 401k limit per year on how much you can do this? Like 18k or something. I can see people abusing this and putting million into the 401k tax free
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Yeah, this always existed but the magnitude is so much greater for so many more people now because companies are staying private longer. I think it's healthy to just let vesting mean you get to take it with you, period, no catch. But it's worth noting this means there will be fewer options returned to companies in comparison to the last boom. Scott Kupor made this point although he framed it in a poor way.[1] He note…
> I think it's healthy to just let vesting mean you get to take it with you, period, no catch. This sounds great in concept but in practice acquiring the shares is the taxable event. So if a company just gives you shares, that's the taxable event. And since you get taxed on the delta between your strike price and the "fair market value" (even though there isn't one), it would happen on the company's schedule, not you…
We agree. That's all I meant by "you get to take it [your vested options] with you," as opposed to turning them in on the way out the door if you can't pay the strike price + AMT.
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Disclaimer: This a lay-man's understanding... So you join a shiny new "start up" and they offer you some stock options as part of their compensation package. This is typically done to improve compensation without requiring additional liquidity which is typically a limited resource for a start up. These "ISOs" (Incentive Stock Options) are usually option agreements where the company agrees to let you "purchase" shares…
One small detail, an ISO can be priced at literally any value the company wants (within fiduciary responsible limits of course). They don’t have to be (albeit commonly are) set with a strike price of the value of the company at time of grant. This is partly why ISOs are so heavily regulated.
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Maybe not in a startup? I have company stock given to me in my 401k. https://www.fidelity.com/viewpoints/personal-finance/company... >More than 15 million people own about $400 billion of company stock in Fidelity-administered workplace retirement plans alone
Isn't there a 401k limit per year on how much you can do this? Like 18k or something. I can see people abusing this and putting million into the 401k tax free
But, yes, as pointed out, you do pay taxes, but ONLY when withdraw from it, which you can do without a penalty when you reach a certain age. The capital gains are tax free. But I was saying distributing stock into a 401k is not a taxable event, not that you'd never pay taxes.
It's not abusive to fill up your 401k, that's what it is there for.
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Isn't there a 401k limit per year on how much you can do this? Like 18k or something. I can see people abusing this and putting million into the 401k tax free
Yes, for 2017 the limit is 18k . But it’s worth noting for those that may not know how a 401k works (I’m not suggesting that’s you) - it’s not “tax free”, it’s just deferred until withdrawn (for a traditional 401k, there is also a Roth variant like IRAs).
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Yes, for 2017 the limit is 18k . But it’s worth noting for those that may not know how a 401k works (I’m not suggesting that’s you) - it’s not “tax free”, it’s just deferred until withdrawn (for a traditional 401k, there is also a Roth variant like IRAs).
Capital gains are tax free.
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"If you have the dollar amount and the # of shares, then you can backtrack it to a rough percentage." Perhaps. But if a company will not give you a percentage of ownership and expects you to accept this as compensation, you should quit. Full stop. If the company won't tell you how to fairly evaluate your options, they're operating in bad faith, and should not be rewarded for their sleazy behavior.
I agree with you on that regard fwiw. I've wondered whether a company will tell me what the liquidation preferences and antidilution clauses for its preferred shares are, since that also comes into play pretty significantly wrt evaluating the value of ones equity offer.
The important principle, though, is that they shouldn't be hiding anything from you. If the company won't even tell you the percentage your shares represent, you can't trust them to do anything else.