[raylad]

Someone here is confused, and it might be me. As I understand it:

In a company where the fair market value share price is $1/share, if you get granted 100 options, you owe tax on $0 because options are not taxable.

If you get granted 100 RSUs which are all fully vested, you owe tax on $100 because stocks are taxable. If the RSUs are 0% vested you don't owe any tax yet.

Then, if the share price goes up to $2 a share, you still owe $0 tax on your options, but if you have RSUs and 50 of them now vest, you immediately owe tax on $100 (50 x $2) - unless you did an 83b election and paid taxes on the 100 shares at $1 a share at the time you got the grant.

If you exercise the options, now you owe tax on $200 (100 x $2), whether or not you can sell the stock.

So again, I don't understand why Stripe would have a tax bill under any of these scenarios.

The employees would have a tax bill connected with vesting of RSUs if they had not done an 83b election, but no one else would have any tax due until they (exercise in the case of options) and then sell the stock.

[bink]

If I'm understanding it correctly, the employees won't have a tax bill if they let the options expire, but they are presumably worth millions so they don't want to just throw that money away. If they exercise then they will owe taxes and they will also have no way to sell the shares (currently) to pay the tax bill.

[raylad]

Sure, but options don't expire while you are an employee.

So if Stripe wants to let employees sell stock, they only have to exercise options equal to the number of shares they will sell, then they can use the proceeds to pay the tax.

I still don't understand why there is a tax bill for Stripe.

[theIV]

> Sure, but options don't expire while you are an employee.

ISOs (not totally sure about NSOs) have a 10 year expiration from grant date[0].

[0]: https://www.law.cornell.edu/cfr/text/26/1.422-2

[braza]

But one thing that I did not follow: in my experience most of the companies that offers RSUs are mostly public. I have been in some companies as Stripe and all of them gave options due to this exactly kind of issue.

Does someone has some rationale/speculation on why Stripe issued RSUs instead options?

[kasey_junk]

RSUs tend to be considered lower risk to employees. For instance if you were issued options last year when stripe was valued at double what it is now, there is a good chance your options are underwater.

With RSUs while the value has gone down, they are at least worth something, if you could sell them.

Also, Stripe was in hiring competition with companies who used RSU compensation as a major component of total comp. This allowed them to more easily do an apples to apples comparison.