Re:Bolt Financial's loans come due
by s1artibartfast on Thursday May 26, 2022 @02:52PM
(#31522069)
>Why would employees exercise prior to departing and/or with no exit in sight?
Mainly to avoid taxes if stock price goes up.
If the price is $1 today and you exercise the option to buy stock, you pay taxes on $1.
If the price goes up to $20, you pay taxes on $20.
If the company fails before you can sell, you loose moeny in both cases. However, if you wait, you payed a lot more taxes on stock that is worthless.
People can easily pay hundreds of thousands in taxes on stock that they can never sell. Also, sometimes the stock goes up so much that employees cant afford the tax bill to exercise the option, because the stock cannot be sold until IPO.
Mainly to avoid taxes if stock price goes up.
If the price is $1 today and you exercise the option to buy stock, you pay taxes on $1.
If the price goes up to $20, you pay taxes on $20.
If the company fails before you can sell, you loose moeny in both cases. However, if you wait, you payed a lot more taxes on stock that is worthless.
People can easily pay hundreds of thousands in taxes on stock that they can never sell. Also, sometimes the stock goes up so much that employees cant afford the tax bill to exercise the option, because the stock cannot be sold until IPO.
https://secfi.com/learn/exercise-stock-options-tax-implicati...
https://carta.com/blog/equity-101-exercising-and-taxes/