7 ms·

Adding to Sam's post I'd like to see employees made aware about tools like 83(b) elections to decrease their tax liability.

x0x0 12y ago
do you (or anyone else) know what happens if you do an 83b election then leave the company before 4 years? Also, this doesn't really help post A, particularly if you're getting pretty senior and have a bunch of experience. At my last place, I would have had a $50k bill to do an 83b. I could write that check but goddamn is that a lot of cash to part with. edit: thank you @rosser
- rosser 12y ago
  Typically, the company will buy back unvested shares at the strike price if you've forward exercised them.
- the_watcher 12y ago
  Ask to forward exercise when joining. From what I understand, there isn't a negative impact on the employer, you are just being granted RSU's that they have an option to buy back for $0 before your cliff, and then convert to ISO's at your cliff. You can file that 83b election immediately, which will substantially drop your tax burden.
  - x0x0 12y ago
    right right, but I have to (1) come up with $50k in cash (in my example), and (2) if the job isn't working out, I want the fraction of my initial payment back upon leaving and it isn't clear this happens...
    - Matt_Mickiewicz 12y ago
      Early exercise makes the most sense for seed stage companies where the exercise price is still low... at companies where you have to spend $50K or more to exercise, I've seen loans being handed out by the company to its executives to make it possible for them to take advantage of it.
      - lhnguyen09 12y ago
        Any insight into why a company wouldn't allow forward exercising? The legal/finance team at my company refused to do it, though I wasn't given an explanation why.
        hundt 12y ago
        * It's extra hassle/paperwork. * Employees have less incentive to stay because they won't run into the AMT "handcuff" situation (where if they leave they have to exercise their options or lose them, and they can't afford to pay the taxes to exercise the options). * More employees will actually exercise their options before liquidity, which means more minority shareholders.
  - Matt_Mickiewicz 12y ago
    Yep, we offered this to all of our employees at Hired after our seed round, but before our $15m Series-A. The majority took the early exercise option once they understood it. It's a massive lift for our team (based on tax savings) when an eventual liquidity event occurs, with no downside for the company other than additional paperwork and some legal costs.
rosser 12y ago
I actually had to explain 83(b) elections to HR at my current job. I don't think it's just employees that need to be made aware of them...
100k 12y ago
I have tried to figure this out: is there any point to doing forward exercise and 83(b) election with ISO options, which is what most employees get?

x0x0 12y ago

do you (or anyone else) know what happens if you do an 83b election then leave the company before 4 years? Also, this doesn't really help post A, particularly if you're getting pretty senior and have a bunch of experience. At my last place, I would have had a $50k bill to do an 83b. I could write that check but goddamn is that a lot of cash to part with. edit: thank you @rosser

rosser 12y ago
Typically, the company will buy back unvested shares at the strike price if you've forward exercised them.
the_watcher 12y ago
Ask to forward exercise when joining. From what I understand, there isn't a negative impact on the employer, you are just being granted RSU's that they have an option to buy back for $0 before your cliff, and then convert to ISO's at your cliff. You can file that 83b election immediately, which will substantially drop your tax burden.
- x0x0 12y ago
  right right, but I have to (1) come up with $50k in cash (in my example), and (2) if the job isn't working out, I want the fraction of my initial payment back upon leaving and it isn't clear this happens...
  - Matt_Mickiewicz 12y ago
    Early exercise makes the most sense for seed stage companies where the exercise price is still low... at companies where you have to spend $50K or more to exercise, I've seen loans being handed out by the company to its executives to make it possible for them to take advantage of it.
    - lhnguyen09 12y ago
      Any insight into why a company wouldn't allow forward exercising? The legal/finance team at my company refused to do it, though I wasn't given an explanation why.
      - hundt 12y ago
        * It's extra hassle/paperwork. * Employees have less incentive to stay because they won't run into the AMT "handcuff" situation (where if they leave they have to exercise their options or lose them, and they can't afford to pay the taxes to exercise the options). * More employees will actually exercise their options before liquidity, which means more minority shareholders.
- Matt_Mickiewicz 12y ago
  Yep, we offered this to all of our employees at Hired after our seed round, but before our $15m Series-A. The majority took the early exercise option once they understood it. It's a massive lift for our team (based on tax savings) when an eventual liquidity event occurs, with no downside for the company other than additional paperwork and some legal costs.

rosser 12y ago

I actually had to explain 83(b) elections to HR at my current job. I don't think it's just employees that need to be made aware of them...

100k 12y ago

I have tried to figure this out: is there any point to doing forward exercise and 83(b) election with ISO options, which is what most employees get?