John P. Barringer
My clients who work at startup companies preparing for an initial public offering (IPO) are giddy with thoughts of the wealth and opportunities their pre-IPO stock compensation will provide. I try to set them straight with five financial-planning points that may help to manage their post-IPO expectations.
Tristan Brown, Jennifer M. Wolff, and PLC Employee Benefits & Executive Compensation
Equity compensation is often a significant component of the total compensation paid to employees and other service providers. While some provisions of private company equity plans mirror the provisions in public company plans, in the private company context, equity compensation raises special concerns.
Ryan Harvey and Bryan Smith
As privately held companies prepare for their market debuts, they make changes in their equity compensation programs beyond just stock options. This article looks at some of the shifts you can expect in your stock grants from the startup stage through the IPO and the post-IPO periods.
The biggest surprise for employees with stock options at pre-IPO companies is often the amount of taxes they need to pay when their company goes public or is acquired. When they exercise their options after the IPO or as part of the acquisition, selling the stock at the same time, a large chunk of their proceeds goes to pay federal and state taxes. This article looks at ways to reduce this tax burden.
Edwin L. Miller, Jr.
Employees in startup companies often have misconceptions about their stock options and restricted stock. Understand what could happen to your stock options or restricted stock in venture capital financings, in an acquisition, or in an IPO. Part 1 looks at M&A deals; Part 2 analyzes IPOs.
Edwin L. Miller, Jr.
Stock options and restricted stock in pre-IPO companies can create substantial wealth, but you need to understand what might happen to your stock grants in venture capital financings, in an acquisition, or in an initial public offering. While Part 1 looks at venture financings and M&A deals, Part 2 analyzes IPOs.
Deciding whether to exercise now or later has always been difficult. It has become even more confusing with a twist at pre-IPO companies that allows you to exercise options immediately upon grant.
Alisa J. Baker
Part 1 looked at the problems of conflicting or inconsistent provisions among different documents. Part 2 discusses which existing documents and rules nonfounder executives must consider when negotiating for equity compensation during the early (pre-public) stages of a company's development and growth.
myStockOptions.com Editorial Staff & Contributors
Finding legal techniques to minimize taxes is almost as popular in the US as stock compensation. These sophisticated techniques with founder's stock and options can defer or reduce taxes.
Joanna Glasner and Bruce Brumberg
Don't feel anxious or discouraged about stock-price volatility. As the experts will tell you, equity compensation is a tool for building wealth over the long term.
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You must find out the following before you take any action with an equity award in a privately held company...
The core concepts of equity compensation are similar. The tax treatment is also the same, even for shares that are restricted securities, which can present a tax dilemma. The differences include the following...
If your employer is a for-profit corporation, it probably can offer stock options, restricted stock, or other types of equity compensation to its employees. There may, however, be many reasons why your employer is not offering stock grants...
Stock in privately held companies lacks liquidity, is not registered with the SEC, and usually has company-imposed contractual resale limits, so resales are difficult and need to follow the requirements of SEC Rule 144. Some private companies allow resales of stock by...
This is done mostly by startup and private companies. Early-exercise stock options allow you to exercise when the stock price is low and then start your capital gains holding period. The risk is that...
Different methods can be used. The valuation of options and stock issued by private companies is more art than science. At least in the context of valuations for estate and gift tax purposes, the IRS has admitted...
A repurchase right is a company's contractual right to buy from an employee any stock resulting from the exercise of a stock option or other stock grant. The repurchase right can be exercised by your company even if...
While it is hard to find data, we have located a few sources. The data and examples from the surveys summarized here show that...
Unlike public companies or large private companies that may have grant guidelines, most private companies determine the grant size by a combination of factors. Surveys show that...
At pre-IPO and other private companies, boards of directors usually determine exercise prices for stock options. They base them on the stock's fair market value. Methods for valuation include...
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