291–300 of 396 posts
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Not sure what you mean by "should" here, but the IRS definitely considers it to be a gain that you have to pay taxes on, regardless of whether you can sell the shares.
Would I own tax then on the classic car I bought 20 years ago which is now worth 10x the buying price and I can actually sell it for that, even though if I won't sell it?
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Because shares in a company represents something of value. Just because a company’s shares are privately held doesn’t make them worthless. The IRS has ways to estimate valuations of privately held companies. The problem unique to folks likely to be reading here is the exponential growth that can happen in early stage start ups. The options might’ve represented 100k in value when they were granted, but grown to 1m in…
I understand how the law works, but it's quite silly to consider the shares as having value when it's literally impossible to convert them to that "value" to pay the tax. By definition the shares do not have value. It's like if I handed you a coin that I promise is worth one million because I will buy it from you for one million right now, except I won't buy it from you now and I don't plan on buying it from you ever…
Good thing that nobody is forcing you to take ownership of that worthless thing then.
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Because shares in a company represents something of value. Just because a company’s shares are privately held doesn’t make them worthless. The IRS has ways to estimate valuations of privately held companies. The problem unique to folks likely to be reading here is the exponential growth that can happen in early stage start ups. The options might’ve represented 100k in value when they were granted, but grown to 1m in…
If they become worth zero do you not have a capital loss to deduct from future income? So you would gradually recover the tax paid when you got the now worthless shares in the form of future taxes you don’t have to pay.
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> You dont have free healthcare. You pay for it like tech employees in the US do and you probably get worse service. True, but there's no stress due to possible crazy variations in prices, "in network" - "out of network" garbage, etc. When people talk about "free healthcare", what they're really saying is: "out of pocket healthcare expenses are very small and always capped at a decent level, and I have access to heal…
The problem with those social mobility scores is they rank it by “chance of going from lowest quintile to highest quintile”. But the quintiles aren't the same. A good example is Canada vs the US vs the UK. The top US income quintile is 153,000 USD. Canada is 131,000 CAD (98,000 USD). The UK is 87,000 GBP (105,000 USD). So you could have less social mobility in the US (going from 1st to 4th quintile) than Canada (1st…
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Based on personal experience and friends who have been at unicorns in their early days - the first 50 employees average about $0. The next 100 average about $0. In every case, the stock that the employees holds gets reclassified and diluted until it’s a funky employee-only stock that’s only saleable back to the company at nominal value, but the company isn’t buying. So sure, maybe there’s some kind of nominal value,…
Are these experiences in the US? Asking because I imagine conditions would differ country to country.
(Uninvolved growth-stage CFO perspective) The IRS mandates that stock option grants expire after 10 years. My best guess is these early employees are quickly approaching those grants' 10 year mark, and face an exercise or "lose it" situation. If you exercise, you have to pay the gain. For early employees, this could/would be a massive bill -- probably well into the 7-8 digit range for some early hires. Stripe seems t…
Could anyone translate this into “The early employees will get wealthy from this” or “they’ll get slightly more than they would’ve gotten from getting a job at BigCo over 4 years”? My problem with equity grants is that everyone treats them like they’re so valuable, when in fact the EV is usually close to zero. That wouldn’t be so bad if the upside was really good, but dealing with nonsense like this makes them even l…
If you are joining a company and taking less than 1% of equity in the company the best way to think about the equity is "This may end up being a yearly bonus of 50-150k, but probably will be worth nothing"
I'm curious, why even have the 10 year expiry cutoff? Is there a regulatory ask that this be the case, or is there logic I'm not seeing? Hindsight is ofc 20/20, those contracts have long since been set in stone, but I can't help but think Stripe (and maybe other future companies) could have saved themselves a $6bn headache by not having the expiry in the first place.
Given that you use double trigger RSU to avoid getting taxed at grant, all double trigger RSU will have an expiration.
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Someone here is confused, and it might be me. As I understand it: In a company where the fair market value share price is $1/share, if you get granted 100 options, you owe tax on $0 because options are not taxable. If you get granted 100 RSUs which are all fully vested, you owe tax on $100 because stocks are taxable. If the RSUs are 0% vested you don't owe any tax yet. Then, if the share price goes up to $2 a share,…
But one thing that I did not follow: in my experience most of the companies that offers RSUs are mostly public. I have been in some companies as Stripe and all of them gave options due to this exactly kind of issue. Does someone has some rationale/speculation on why Stripe issued RSUs instead options?
With RSUs while the value has gone down, they are at least worth something, if you could sell them.
Also, Stripe was in hiring competition with companies who used RSU compensation as a major component of total comp. This allowed them to more easily do an apples to apples comparison.
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But we get frEe hEaLtHcaRe! And when you factor in the municipal bus network, a $40k salary at Klarna in Stockholm is basically the same as a $350k salary at Stripe in the US. Not to mention in the USA, god knows what cookies might be put into your browser by any random cooking blog, without warning.
> And when you factor in the municipal bus network, a $40k salary at Klarna in Stockholm is basically the same as a $350k salary at Stripe in the US. Sorry, I'm European but this is just silly. There's no way $40k in Sweden buys you equivalent quality of life as $350k in the US, even when taking all the welfare state factors into account.
Sweden for the most part sucks these days but part of that is the idea that you can lounge through some average free education and then get $350k while leaving early on Fridays.
Yes, some Americans are born wealthy and some have a lot of privilege. Everyone else, at least that I've known, works at it. Often for 15 years. Then they might get $350k, or laid off.
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Based on personal experience and friends who have been at unicorns in their early days - the first 50 employees average about $0. The next 100 average about $0. In every case, the stock that the employees holds gets reclassified and diluted until it’s a funky employee-only stock that’s only saleable back to the company at nominal value, but the company isn’t buying. So sure, maybe there’s some kind of nominal value,…
Doesn't that mean these the decision makers also don't have liquidity? If so, wouldn't the lack of liquidity not be for them still believing that there's a bigger payday behind the horizon? Still sucks if you want/need the cash now, of course.
Especially for pre-IPO companies that are beholden to fewer financial regulations.
Either you have power, or you have a promise.
... And promises depend on how much you trust your counterparty.