[jpasmore]

Tax laws make this more complex than it needs to be. It would be ideal to eliminate options altogether and compensate employees with stock.

Take the market value of a job minus the amount the employee is actually paid (the startup discount) and pay the discount in stock -- common shares (VC's will be in preferred). All employees should get 2% of salary as a starting point in shares. Allow employee's to buy additional shares by forgoing comp or simply investing. Peg share price and timing of share grants to Rounds or any investment (Notes).

Perhaps have repurchase rights only if terminated for cause. Doesn't matter if someone comes in for 8 months but adds value during that period, so vesting concept is eliminated.

Would need IRS to change grant from ordinary income to capital gain type of treatment where taxes are paid when some actual liquidity/transaction occurs.