Taxes on Exercising Vested NSOs
I'm interested in exercising some NSOs that are fully vested (not for Zocdoc, but for something I'm doing on the side). My understanding is that the spread between the current valuation and the strike price would be considered regular income and that I would owe taxes on that spread. I asked the company if they could provide the current 409a valuation so I could get a sense of what those taxes would be, but they've been unwilling to provide that. Is this normal? Is there something I'm missing here about the exercising process that doesn't require knowing the 409a valuation or fair market value? Also, would taxes be due immediately or when I'm filing this year's taxes?
Ask them now. Not giving you a 409a is extremely sketchy. Taxes are withheld at time of exercise, unlike with ISOs. The company has to withhold anyway at time of exercise. Another thing you can do is to exercise exactly 1 share, become a shareholder, then use your rights under Delaware section 220 to inspect the books and records of the company. Not giving you critical info like this is highly unethical, and once you are a shareholder, very illegal. http://codes.findlaw.com/de/title-8-corporations/de-code-sect-8-220.html http://www.gelaw.com/wp-content/uploads/2015/02/Books_and_Records.pdf
http://www.whiteandwilliams.com/resources-alerts-Delaware-Court-Expands-Scope-of-Books-and-Records-Requirement-in-Favor-of-Shareholders.html And yes, contact a qualified corporate law attorney who's familiar with employee options in your state. I'm assuming the company giving you NSOs is registered in Delaware
Not normal at all
Normal in that they think the 409a evaluation number makes them seem lower in value then they really are. (It's almost always a lower number) I've found the reluctance to give out the number based ignorance of law and insecurity of value it suggests.
Get an accountant or tax attorney
Yeah, I think that's inevitable, but I was hoping to get some rough guidance before I go that route.