An Introduction to Stock & Options for the Tech Entrepreneur or Startup Employee

Post by lemming » Sat, Nov 19, 2011, 12:53 AM UTC

drusenko wrote: post #24

dmix wrote: post #8

Earlier quoted context omitted.

I'm going to check this book out. But I've always had one nagging question about vesting I haven't found a good answer for. Say you have a bunch of shares vesting over 2-4 years. Is it possible (or realistic) to make an arrangement that in the event of an acquisition or liquidity event that your stock becomes full vested? Even if its been less than the full vesting period?

Acceleration usually comes as single-trigger or double-trigger. Single-trigger is what you are talking about: when all of your options vest immediately upon acquisition. It could be argued that this is unfair to those that have worked their full time to earn their full options grant. Usually, in this arrangement, a certain percentage of your shares are subject to the trigger (so, 25% vest immediately, for example). I…

Post by tinco » Sat, Nov 19, 2011, 1:04 AM UTC

Post by d_r » Sat, Nov 19, 2011, 4:00 AM UTC

tinco wrote: post #33

Hey there's something I'm a bit confused about. The text talks about how when you receive stock as an employee you pay income (gains) tax over them for which they might not have the cash. Does this also hold for other stock holders like the founders? When the FMV has increased, do founders also have to pay taxes for their shares?

Post by dgottlieb » Sat, Nov 19, 2011, 5:18 AM UTC

lemming wrote: post #31

drusenko wrote: post #24

Earlier quoted context omitted.

Acceleration usually comes as single-trigger or double-trigger. Single-trigger is what you are talking about: when all of your options vest immediately upon acquisition. It could be argued that this is unfair to those that have worked their full time to earn their full options grant. Usually, in this arrangement, a certain percentage of your shares are subject to the trigger (so, 25% vest immediately, for example). I…

So in the case where you don't have accelerated vesting, what happens to unvested options in an acquisition? Do they get converted to options in the equivalent dollar amount of stock in the acquiring company on the same vesting schedule? (Obviously subject to negotiation, YMMV etc etc...)

Post by notbitter » Sat, Nov 19, 2011, 6:23 AM UTC

nickfromseattle wrote: post #36

d_r wrote: post #35

Earlier quoted context omitted.

To avoid this, vesting founders would presumably file an 83b election within 30 days of receiving the shares (mentioned in the PDF.) Then, they only have to pay tax when they sell the shares. And if they held on to those shares for over one year, this would be a smaller, capital gains tax. Described in more detail here: http://www.grellas.com/faq_business_startup_004.html

What is the definition of 'date of grant' in this sentence: Procedurally, an 83(b) election must be made within 30 days of the date of grant. Is it when the vesting schedule says you vest? Is it when the vesting schedule says you vest, and the stock is physically sign over?