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#jobs-discuss
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2023-02-02
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Benjamin14:02:28

What is the culture around stock-options? Is it rude to decline getting them?

eggsyntax14:02:15

I'd probably be a bit put off if a prospective employee declined stock options that I was trying to just give them -- it would suggest that they thought the company was unlikely to succeed. But what's the advantage of declining them? Unless I'm missing something, there's no downside to accepting them; if when you leave you don't think the company's going to succeed, you can just choose not to exercise them. I don't think they have any tax consequences if you don't exercise. I've yet to exercise any of the options I've gotten, so I could definitely be missing something! Hopefully if that's the case, someone with more expertise will chime in and I'll learn something 😁

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eggsyntax14:02:57

(unless they're offering you a tradeoff between salary and options, of course)

Benjamin14:02:26

ah I see. I didn't know the mechanics of how they work. I thought I basically am offered to buy 😅

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p-himik14:02:29

Exercising certain options is much harder than it sometimes appears. Lots of conditions and even potential expiration.

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R.A. Porter14:02:24

I’ve negotiated contracts where I requested more salary than options (or only salary with no options), and on an acquisition a few years ago I flat out refused the options that I would have had to pay for (not a lot of money, but I wasn’t going to give that new vulture company one cent). I’ve also had jobs where I was more interested in the options than the salary. It may be rude in the eyes of some, but that’s not on you. If you have present monetary needs that warrant a higher salary, that’s more important to you than potential down the road.

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eggsyntax14:02:53

> on an acquisition a few years ago I flat out refused the options that I would have had to pay for That sounds really scammy, I've never encountered options that you had to pay for up front 😖 & yeah, agreed that if it's a tradeoff it's totally reasonable to choose more-salary-fewer-options. I'm just suggesting that there's no downside to accepting options (that I know of) if it's not a tradeoff.

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lread14:02:03

In Canada, I was an employee at a startup that failed. I had stock options. My memory is fuzzy now, but there was an income tax hit for me. I do remember thinking, "wow, that was the most expensive lottery ticket I bought".

eggsyntax14:02:43

https://turbotax.intuit.com/tax-tips/investments-and-taxes/incentive-stock-options/L4azWgfwy that there are no tax consequences when you receive options or (assuming they're the usual 'incentive stock options') if/when you exercise, only if/when you sell whatever options you chose to purchase ('exercise') (hopefully they know what they're talking about, or we're all screwed 😜 ) (NB IANAL)

Cayenne15:02:59

If you exercise a lot of options that have appreciated significantly you can be subject to the alternative minimum tax. The above link covers that too.

eggsyntax15:02:29

Good point, thanks for pointing that out! (still only if you exercise though)

marciol15:02:02

I know some folks that work at Nubank that cannot exercise their options at the best moment when they did the IPO, so this sort of conditions to exercise it can restrict how much you likely get from stocks. Now some can do it, but the stocks are evaluated as a fraction of how they value at that point

marciol15:02:03

But as @U077BEWNQ said, this can be interpreted the wrong way, so maybe it's better to not refuse options if you really want to be hired.

fuad15:02:49

> cannot exercise their options at the best moment when they did the IPO it's a lock-up period for selling, not exercising. lock-ups are pretty standard though, but yeah, need to be taken into consideration

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lread15:02:25

Also: best to consult an accountant with expertise where you live.

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enn16:02:36

I have had a few offers where I could choose between more options/less salary and the reverse. I always chose more salary with fewer options and I don’t think it was ever seen as rude, but who knows. In evaluating offers I usually value private company stock options at $0.

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Martynas Maciulevičius22:02:05

> In evaluating offers I usually value private company stock options at $0. Yes but when people say about "most expensive lottery ticket I bought" then actually the cost can get negative.

Cayenne23:02:19

Well if you value them at $0 you won’t exercise them.

lread05:02:42

Can't remember deets, but remember I am in Canada, and I definitely paid taxes on worthless stock options at a failed startup. I'm not sure what countries you are all in, but tax laws vary.

Martynas Maciulevičius08:02:58

Is it sensible to tell that the giver of the stock options should pay the associated costs if they propose this option? Because it's we that accept the options, it's not that we ask for them. This is form of a payment and if they decide that they want to provide it this way then it's on them to make sure the payment is fully paid. If they decide to sell the company and all holders must pay tax then it's on the company's management, not on the holders. Is my logic flawed?

eggsyntax13:02:14

@UE21H2HHD totally, wasn't trying to say you were wrong, just trying to verify my understanding of US tax law since I'm there and I believe Benjamin is as well.

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AJ Jaro17:02:08

There are different types of stock options that you can get. The NSO have income tax implications and the ISOs do not, at least in the US. I'm not sure exactly how these get decided, but my impression is that these are just randomly chosen by someone at the startup and then written into your contract. https://pulley.com/guides/iso-vs-nso#:~:text=The%20main%20difference%20between%20ISOs,not%20have%20the%20same%20requirements. > The main difference between ISOs and NSOs is that ISOs come with no tax liability on exercise, but come with a set of requirements, whereas NSOs come with tax liability on exercise, but do not have the same requirements.

dgb2317:02:00

my advice is to talk to a third party you can trust, like a professional (lawyer/trustee etc.) or someone in your close circle who's been around the block to see both sides of this kind of thing. Always think of contracts around money/options/shares etc. as an eye to eye business thing with both parties representing their own interests. Declining such a thing should not be seen as "rude" in any way if you think of it this way. In fact if you do decline based on your own financial interests and they cannot appreciate that, it might be a red-flag, hinting at a deeper problem.

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dgb2317:02:32

In short: It should be beneficial for both parties.

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eggsyntax20:02:16

> Always think of contracts around money/options/shares etc. as an eye to eye business thing with both parties representing their own interests. Relevant: this is the single most useful thing I've ever read about negotiation of salary et al, and I reread it every time I'm going to do a round of negotiations: > ...This is pretty much how I feel every time I talk to my engineering friends about salary negotiation. We overwhelmingly suck at it. We have turned sucking at it into a perverse badge of virtue. We make no affirmative efforts to un-suck ourselves and, to the extent we read about it at all, we read bad advice and repeat it, pretending that this makes us wise. > Dude, it’s five minutes. Let’s un-suck your negotiation. https://www.kalzumeus.com/2012/01/23/salary-negotiation/

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marciol22:02:42

Classical text about salary negotiation

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