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Ask HN: Former employees' RSUs at risk after startup's IPO

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Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#151

Post by x0x0 »

konfusinomicon wrote: post #150
deanmoriarty wrote: post #56

This is sad and surprising. I’ve been through so many shenanigans during my previous life as a naive startup employee: paid huge amounts of AMT (which took years to recoup via AMT credits), was not offered 83b election, had to write huge checks to exercise ISO, had to pay taxes when exercising NSO, etc., but I had never heard of a company threatening to forfeit the RSU if tax is not wired to them, it’s simply wild, e…

that AMT struggle is real, painful, and needs legislative changes when it comes to ISO exercise in private companies. especially when you have to set up a payment plan for the taxes owed, which are ever increasing due to fines and penalties, while the owed credit is ever losing value due to inflation and the lost opportunity to put that money to work. and on the state tax side you should plan on not moving and losing…

The only legislative changes we've gotten recently were actively designed to screw startups (thank the Republicans for Section 174 and a bunch of layoffs), so don't hold your breath.

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#152

Post by deanmoriarty »

romanhn wrote: post #140
amluto wrote: post #139

Earlier quoted context omitted.

> was not offered 83b election The 83b election mechanism is a mess, and plenty of startups don’t explain it well to their employees, but I wasn’t aware that an employer had any particular say in it. Generally, the employee makes the election by mailing the appropriate documents to the IRS. (I’m not a lawyer. Do your own research.)

As far as I know, a company still has to allow early exercise in order for you to be able to purchase unvested options.

Correct, and this is what I originally meant.

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#153

Post by eb0la »

Lawyer-up. Get proper legal advice.

I won't pay anything that has to go to the IRS or similar to a corporation.

I might be OK for the company, but might put you in a big trouble with the goverment. Even if they act in good faith, you will need to do some paperwork or it will trigger an audit with the IRS that will take _your_ time, not theirs.

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#154

Post by toast0 »

kayo_20211030 wrote: post #119
csomar wrote: post #118

Earlier quoted context omitted.

> So I believe the employer is required to do that withholding. Sure but the withholding is the responsibility of the employer. In this case, shouldn't the employer cover it and send the shares - xx%?

The group are not employees. They're ex-employees. There is no employer relationship in this case. The responsibility for withholding is somewhere else.

RSUs are wage income, and subject to supplemental wage withholding. The responsibility for wage withholding is with the payer.

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#156

Post by [deleted] »

kayo_20211030 wrote: post #148
abduhl wrote: post #134

Earlier quoted context omitted.

I would be wary of assuming that is true for purposes of RSUs. Whether these folks and the company consider them current "employees" is not the employee-employer test for tax withholding purposes.

I'm no expert - not even a talented amateur. But, RSU's for employees are equity, and RSU's for non-employees are expense. I'm assuming, because books must balance, that there's a similar split in tax (and responsibility for tax).

[deleted]

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#157

Post by paulcole »

breakds wrote: post #89
deanmoriarty wrote: post #56

This is sad and surprising. I’ve been through so many shenanigans during my previous life as a naive startup employee: paid huge amounts of AMT (which took years to recoup via AMT credits), was not offered 83b election, had to write huge checks to exercise ISO, had to pay taxes when exercising NSO, etc., but I had never heard of a company threatening to forfeit the RSU if tax is not wired to them, it’s simply wild, e…

I am sorry that you had to go through such shenanigans. Consulting a lawyer is also what we are working on right now. Asking just in case: do you have any lawyer to recommend? Thanks!

In case you don’t have much experience working with lawyers, start your conversation with them by saying, “The outcome I want is _________________.”

If you don’t do this, the lawyer will likely talk about many options, none of which will match your desired outcome. They also generally charge by the hour so you’ll be paying to hear about things you don’t care about.

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#158

Post by brudgers »

emilsedgh wrote: post #94
vessenes wrote: post #74

I read down pretty far and did not see this basic advice: you need a lawyer. Hire a very good one: they are cheaper than poor lawyers by an order of magnitude. That lawyer will review your agreements, the state laws and the communications with the company and tell you where you’re at. You could all go in together for the lawyer btw if you have the same contract. I bet that lawyer will tell you (if this is in Californ…

How would you find good lawyers that have experience dealing with this stuff? I had to sign stuff like this and the lawyers I was sent to seemed they didn't really have much relevant experience and I'm deeply uncomfortable with their assessments given how confused they looked.

Contact the state bar.

They provide relevant referrals to the public.

It is part of how they justify their monopoly.

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#159

Post by phendrenad2 »

Ancalagon wrote: post #7
hansonkd wrote: post #6

> We are curious if this type of distinction between current and former employees is typical for post-IPO RSU settlements. I'm watching this thread, but just as a reminder that it benefits the company to be as vague and complicated as possible for ex-employees trying to exercise their equity rights. You and your equity are effectively dead weight to the company now and it's in their best interest to get you to forfei…

Yet another reason working for most startups is a scam

I don't think it was always that way. There were lots of overnight millionaires when tech unicorns were going IPO like gangbusters. But we haven't had a true unicorn in years, so right now, getting paid in equity is choosing to work for nothing.

Re: Ask HN: Former employees' RSUs at risk after startup's IPO

#160

Post by sameerds »

DannyBee wrote: post #62

A few things - First, What's your end goal here? Is it to not forfeit the RSU's? Is it to not pay the taxes upfront? etc You ask a lot of "is this normal questions", but it sort of doesn't matter if it's normal if you want something else. Maybe the answers affect the chances of getting that something else, but it's really hard to give advice without knowing what you actually want to achieve. It will quickly become a…

I think the real issue is that only one course of action is being forced on ex-employees, while the same option isn't the one exercised by current employees. Besides that, personally, I would be very worried about "paying up front" and opting into a process that is not in my control.
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