Same valuation more options vs fewer rsu series b/c stage start up. Which should I choose? Why?
RSU: You don’t have to exercise - you don’t have upfront financial commitment - low risk Options - you need exercise with your money, pay taxes before you actually sell - high risk. If your cash rich and willing to take risk - you make more money if your startup perform well at IPO
Not necessarily. Nonmarketable RSUs are equally worthless. OTOH, there's no tax risk, and no option cost.
Makes sense. I've always sold RSUs immediately because of the lack of tax benefit and getting more of them in the same company as they vest being enough risk/reward for me.
Options have more risk, more reward
Not necessarily. There's a tax advantage in future growth, but the literal reward is higher in RSUs all other things being equal (which they rarely are - options are for companies with a lot of growth potential allowing you to bet on the company without cash up front, RSUs are for companies already worth a lot so they can pay you in stock rather than cash.)
Cash
In a series B or C company, options since RSUs are also useless unless acquired, IPO. The strike price is also super low. In company on IPO pathway in next year or public company then RSU
Yes this is a good way to look at it. If the cost to exercise is pretty negligible, then options are fine, and could have a slight tax advantage. If the valuation is already over a billion, it’s very expensive to exercise those options if you leave the company before there’s liquidity. Options are also only worth $ if the valuation goes up, where as RSUs can still be worth a lot if they IPO at a lower valuation.
At least here in Canada options are taxed at a lower rate. If you’re at a company that will have serious growth options are great
Depends on the ratio of options to rsus
.6 rsu to 1 option
Ah, it probably doesn’t make much difference. Sounds like stocks are probably like worthless anyways so everything depends on upside. I’d go options
Gimme some of dat old RSU... sweet RSU... R sssSssssss U... dat same old U....
Can someone who has received RSUs from a private company explain the tax implications to me? As I understand it, when I exercise my (private) options I’ll have to pay income tax on the difference between cost of acquisition (strike price x num shares) and fair market value at the time. Do you not have to pay income tax on private company RSUs upon receipt like you would with a public company?
1) For ISOs, you have AMT income for the spread on options you exercise and hold, which is not the same as regular taxable income. It usually results in a similar amount of tax due, but *if* you later sell the shares at a profit you may be able to credit some of that back. It's a weird mess and you would need to look at your particular tax situation to see how much the short term and net long term tax cost. 2) For RSUs, it depends on how the RSUs are structured. Some RSUs have a liquidity event vesting condition in which case they are just an non-taxable paper until after the company goes public or (potentially subject to acquisition terms) gets acquired. When I had them (at GWRE) I don't know what happened to them if you left before the liquidity event event but there was no tax impact until we got the big dump of shares about 6 months after going public when the lockup expired. The alternative is to treat then like public shares - the company issues shares at vesting, and sells a certain portion of that to cover the tax withholding. There is no direct tax due if you have your withholding set correctly but it does have tax implications because your marginal bracket can change and your agi and taxable income will be higher which can effect your eligibility to do things like write off student loan interest.
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You own the RSUs once they vest (less taxes), options you still need to purchase.