You can’t “sell to cover” like in the case of a publicly traded company, so how is it taxed? Does the $ amount of RSUs * tax rate come out of your base salary? If so, that sounds awful since you can’t really sell your vested RSUs anyways. Secondly, lots of startups are flaunting that they provide RSUs instead of ISOs nowadays. Is this a sign they’re close to IPO? Is this better than getting ISOs? Are there tax advantages/disadvantages to getting RSU vs ISO? Tagging some startups that I know give RSUs instead of options. #rsu #equity #stockoptions #startup #alluxio
No clue but I’m also getting preipo rsus and would love to know too 😬
Double. Trigger. The second trigger prevents taxes until there is liquidity. The side effect of this is that you actually don’t possess anything until both triggers are vested (time + liquidity). The “vesting schedule” (ie 25% at 12 mos and 1/48th each month thereafter) refers only to the time/service trigger. In reality, each RSU only vests once both triggers are satisfied (time + IPO/acquisition/other liquidity event). Suppose you work at a pre ipo company for 4 years and receive RSUs that have all “time-vested” by the start of year 5. Then the company IPOs. All of those RSUs don’t fully vest until year 5, as a result of the IPO satisfying the liquidity trigger, being that the time/service trigger has already been satisfied for each. All 4 years of RSUs are taxed as income in year 5 at the fair market value when they vest. You pay no taxes if the company never IPOs/gets acquired, and you also never actually own any equity unless they do either. These type of RSUs usually completely expire in 5-10 years if both triggers are not satisfied.
Thanks. Will read up on double triggered RSUs. Is this something you can negotiate and ask for when deciding to accept an offer from a pre-IPO company that gives RSUs instead of options?
I’d wager that 99% of pre-IPO tech companies offering RSUs only offer double-trigger RSUs.
You pay taxes when your RSUs vest. Depending on the company that manages your RSUs, you will either be able to "sell to cover" or pay for the tax liability for those RSUs with cash. https://carta.com/blog/rsu-restricted-stock-unit/
How can you sell to cover pre-IPO stock? Also paying for the tax liability with cash sounds horrible…what if the company never IPOs? You’ve basically paid tax for nothing
The carta link doesn’t talk about taxation in the case of pre-IPO RSUs
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It’s paper money, so no taxes
So then you don’t pay any tax on rsu vesting? Only when you sell (if company IPOs)?
No, usually shares are withheld for tax when IPO happens and they're granted to you