Pre-IPO: Basics

NEW! Private Company Stock Options And RSUs: 10 Facts To Know About The New Tax-Deferral Opportunity This is premium content

Bruce Brumberg
Stock options and RSUs are popular at startups and late-stage pre-IPO companies. However, shares in privately held companies typically lack liquidity and thus cannot be sold, creating difficulty when taxes are owed on the income recognized. To address this problem, the Tax Cuts & Jobs Act introduced an income-deferral opportunity for certain types of stock compensation at private companies in Section 83(i) of the tax code.
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