[epa]

The kicker here is that the option life is 10 years, even if you have left the company. So you can avoid tax by not exercising until you plan to sell. It becomes a personal choice between 1) do i want the option still, even if i quit, and 2) do i plan to have ownership in the company for a period longer than a year before i sell. Typically most people would prefer 1 over 2.

Keep in mind for someone reading this comment, this is about private companies.

[beagle3]

The other thing to keep in mind is that stock options (especially those given to employees) tend to be much less protected than shares.

If you exercised, and another shareholder got unfair preferential treatment, you have reason to seek compensation or sue. If you haven't exercised yet, .... well ... not so much.

Also, many option contracts give you the right to buy X shares at price Y and do not make special consideration for stock splits - e.g. a 2:1 split would likely make your options worthless by halving the share price, and by halving the percentage of the company that X represents.

So, waiting to exercise until you sell is a very good strategy, except when it isn't - not very common, but you rarely get notified about these issues beforehand, especially if you are no longer involved with the company.