| I was an mid-seniority employee and netted in the low eight figures when I sold my equity stake after our IPO. A couple important points I didn't see others mention:
1. When I got an offer, I asked if I could take a lower salary to get more equity. They said yes. 2. I pre-exercised all my options. So as far as the IRS was concerned, there was no tax liability when I exercised the shares. This meant by the time I sold, it was a long term gain instead of a short term gain on a same-day exercise+sell. Highest federal + CA income tax rate is 53%, so I would have kept less than half if I didn't get to pre-exercise. 3. I was able to sell when the Bush-era tax cuts were in place. So LTCG federal + CA rate was 25% for me. If I sold those shares today, it would be 37%. So it worked out for me, but I'm still an engineer and 99% of my coworkers aren't rich - which means I don't talk about it, I don't flaunt it so no Lambo in the parking lot, and I still try to nod in sympathy when they tell me about how expensive private school or summer camp is for their kids. In other words, my life hasn't changed much aside from my bank accounts. |
Here's a site on it: http://fairmark.com/execcomp/isoexer.htm
Basically, there's no "regular" tax liability, but the difference between the exercise price and the market price at time of exercise counts as income for AMT, and so have a great day, you're gonna pay AMT that year if you do this for any significant quantity of stock.