1
For example, let’s say:
- You just joined company Contoso after their series A round
- they gave you 15,000 ISOs (Incentive Stock Options) @ $0.25/share
Fast-forward to 4 years later. The company is still private, but doing well with each share valued at $10.
If you want to acquire some shares then, you will have to pay 15,000 * 0.25 = $3750 to acquire the shares. HOWEVER, given that the new share price is 40x the old one, the IRS will consider that you owe taxes on your paper gain of $146,250. This can be a huge issue for early employees!
There’s a way out of this though – you can often early exercise your grant, pay out the full amount (in our case $3750) and tell the IRS that you choose to exercise your shares early. You do this by sending them a form to tell them you’re doing an 83(b) election.
I know it’s a bit of tedious googling and paperwork but if you work at a startup that does really well, that could make the difference between life-changing money and walking out with nothing.
If you have any questions, feel free to shoot me an email – my address is in my profile
"As part of our efforts to enhance our security and in response to an incident published on status.heroku.com, we wanted to inform you that we will begin resetting user account passwords on May 4, 2022. We recommend that you reset your user account password in advance here and follow the best practices below:
Minimum of 16 characters Minimum complexity of 3 out of 4: Uppercase, Lowercase, Numeric, Symbol Don't just add a letter or a 1 digit number to the existing password while changing Passwords may not be duplicated across accounts If you do not reset your password and your user account password is reset by Heroku on May 4, 2022, your existing password will no longer work. To log in to Heroku, you must reset your password by accessing the Heroku login page and clicking the "Forgot your password?" link . Please be aware that you may be required to reset your passwords again in the future. "