Options vs. Cash • Hacker News Board

Re: Options vs. Cash

#321

Post by warcher » Fri, Jun 09, 2017, 4:17 PM UTC

warcher wrote: post #319

pbecotte wrote: post #242

Earlier quoted context omitted.

Come now, you believe that more people don't found companies because of the stress? It seems far more likely that most people don't have the capital assets for that to be an option, except three groups... 1. The very young who have very low expenses, the ones who cashed out already, and the ones who started rich.

Untrue. Also untrue that you need funding-- you can replace funding with a brutal workload and a lot of patience. I did it, ask me how, haha. I mean, don't get me wrong, you are gonna sign up to be broke. For a while . A lot of people have kinda boxed themselves in with a very comfortable middle-to-upper-middle class lifestyle that closes a lot of doors via their household burn rate. That's not the system being out t…

Not that there isn't a whole industry revolving around bleeding you white, keeping you chained to the oars by debt until you're no longer useful. Those issues are orthogonal.... I think.

Re: Options vs. Cash

#322

Post by mrajcok » Sun, Jun 11, 2017, 1:16 AM UTC

ant6n wrote: post #318

mrajcok wrote: post #232

Earlier quoted context omitted.

Instead of paying for the shares with cash now, I agree to pay for them in 10 years, paying interest at the minimum rate the IRS will allow (~2%). The 51% recourse means that the shares themselves are the only collateral for 49% of the loan amount (to limit my risk if the company goes bankrupt and a creditor tries to actually collect on the note).

Interesting. Why not use the shares as 100% collateral?

The IRS will treat it as an option rather than a purchase if the shares are the only collateral, resulting in worse tax treatment.

Re: Options vs. Cash

#323

Post by [deleted] » Sun, Jun 11, 2017, 1:16 AM UTC

ant6n wrote: post #318

mrajcok wrote: post #232

Earlier quoted context omitted.

Instead of paying for the shares with cash now, I agree to pay for them in 10 years, paying interest at the minimum rate the IRS will allow (~2%). The 51% recourse means that the shares themselves are the only collateral for 49% of the loan amount (to limit my risk if the company goes bankrupt and a creditor tries to actually collect on the note).

Interesting. Why not use the shares as 100% collateral?

[deleted]

Re: Options vs. Cash

#324

Post by curun1r » Sun, Jun 11, 2017, 6:08 PM UTC

thedufer wrote: post #294

curun1r wrote: post #214

Earlier quoted context omitted.

The biggest difference may be the tax status of the way those two millions are earned. If you're earning $1m from a public company, you're likely finding yourself in a near-top tax bracket and running into AMT in most years. If you get that same $1m from options, you can be paying taxes like a rich person. If you've handled it right, you can mostly avoid AMT and pay the long-term cap gains rate. Another difference co…

I'm not sure post-spending is the right thing to look at. One of the many reasons working at a startup is an awkward sell is that it means giving up money during your lowest-earning years in hope of getting more in your higher-earning years. That's the opposite of the smoothing function a rational person would prefer. That extra spending may well have provided a large amount of extra utility. As far as taxes, a big d…

> Getting that $1MM in one tax year is much worse than spreading it out over even 3-5

Not if it's long-term capital gains. The year that I banked most of my gains from my company's acquisition (sub-$1m, but just), my tax rate was substantially lower than in previous years. Paying taxes like a rich person has distinct advantages since the game is rigged in their favor.

Re: Options vs. Cash

#325

Post by ianamartin » Wed, Jun 14, 2017, 9:33 AM UTC

dreamcompiler wrote: post #287

ianamartin wrote: post #286

Maybe I'm just getting old, but I'm starting to ignore companies that even bring up equity early on in the process, or flat-out state that it's calculated into the compensation package. If I want to play the lottery, then I'll choose to do it with small bills on a lark. Not gamble with a substantial portion of my regular income. If I can't clearly evaluate the total compensation package I'm getting, I will assume you…

Completely, thoroughly agree. I'm a senior engineer. You want my expertise? Pay me. I care fuck all about your options, your free massages, and your foosball tables. If that's all you have to offer, you're probably not a serious company; you're just playing startup theater. Call me when you have a real engineering problem to solve and you have $$ to pay for a solution because you're paying $$$ every day you don't hav…

To be fair, I would consider free massages as a real benefit. Stupid and probably indicative of a culture problem in most cases. But if my company added those, I would work from home less often.

Also, Mike Monteiro from one of the world's best design companies: https://www.youtube.com/watch?v=jVkLVRt6c1U

TL;DR: Fuck you. Pay me.