[phxrsg]

No reason the company cant do that, usually, but it's not advantageous for (most) employees. RSU comp is taxable on vest, but if the stock is not liquid the employee must pay out of pocket at each vesting event to cover the taxes.

[pjot]

Using the 83(b) election, when you’re granted RSUs you are able to pay tax on the value at the time of grant. This can mitigate a lot of the pitfalls mention in the thread.

Disclaimer: this is not financial advice.

https://www.investopedia.com/terms/1/83b-election.asp

[nrmitchi]

By the time a company is issuing RSUs instead of options, the cost to pay those taxes at time of grant is likely out of reach for all but the most already-well-off employees.

[pjot]

Not necessarily - I’ve worked for two startups now that issued RSUs to early employees first, and later switched to an option based package.

[nrmitchi]

Your experiene may be different, but I've only even heard of this (RSUs before options) at the very early, pre-fundraising, stage. And this only works because the taxable value of these RSUs at grant is basically $0.

I'm not sure if this approach would make sense after any sort of traction/fundraising.

[cgb223]

> RSU comp is taxable on vest

I’m in the job interview process right now

Looking at a pre-IPO company with RSUs

Does this mean that I pay taxes on those RSUs when I get them, _even_ if I don’t sell them?

[jfim]

You have to pay taxes on RSU when they vest, regardless of whether you sell or not. It's basically considered cash compensation, but instead of cash you receive shares.

Since your company is pre IPO, they may have a dual trigger vesting schedule, where shares vest over time but require an actual liquidity event for you to actually receive the shares, giving you no tax liability while the company isn't public. However, this means that once the company goes public, you'll have to pay all of that liability at once, at ordinary income tax rates.

Disclaimer: not an accountant, much less your accountant, this is not financial advice, seek proper advice from a qualified professional.

[hedora]

The tax rates will probably not be what most people consider "ordinary". In CA, the top marginal bracket is about 52%.

If you're getting N years of windfall-level income in one year, some of the income is likely to be in that top bracket. This means that all sorts of tax stragegies you probably are not familiar with will kick in.

For instance, it might make sense to move charitable contributions into that year, since the IRS will effectively be matching them.

Also, AMT will probably kick in, so consider hiring an accountant.

[phxrsg]

Depends on if they are set up with a double trigger. Here is a decent explainer, but you can research more about RSU double triggers that can help avoid taxes for large-but-private companies: https://www.parkworth.com/blogs/pre-ipo-tech-giants-using-do...

What this does mean, though, is that until the second trigger is hit you haven't technically vested the RSUs. So you get around the taxation but there may be additional conditions on your equity.

Basically - make sure you read the stock plan

[yardstick]

> So you get around the taxation

And pay a lot more tax in the process, than if you were able to exercise early. IRS always has to have its cake and eat it.

[dilyevsky]

Early exercise is rarely ever an option except for very early stage companies. Most are ISOs with 90d window (which if you’re lucky converts to NSOs with a longer window) which is worst of both world bc of AMT

[yardstick]

Yes, because of IRS taxation rules

[ambrood]

pre-IPO RSUs usually come with a double trigger. meaning you vest them monthly or quarterly etc but a liquidity event such as an IPO, is needed to actually "vest" them in a taxable sense.