Equity 101

Notes Equity RSU

创建时间:2022-04-02 17:08

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1. What is equity?

A document that details who has ownership in a company
records
- how and when you’ll get your shares
- how many shares you’ll get
- how you’ll be paid out
employee option pool
- investors require it, to hire talented people
- let talented stay longer
different types of equity
- preferred shares — investors
- stock options — employees
- advisory shares — advisors

equity grant agreements
- how many shares you are getting
- how much each share is worth
- how long it will take to vest all your shares
types of equity
- stock option — early stage
  - you have the option to buy shares, but not obligated to
  - only vest on a single trigger
  - taxed when you buy/ sell your shares
  - option types
    - incentive stock option
      - pay tax when you sell your shares
    - non qualified stock option
      - pay taxes when you buy and sell shares
- restricted stock units - large startup
  - you receive shares that you own automatically
  - often vest on a double trigger
  - taxed when get vested

Earning the right to buy your shares
- when you are taxed
- when you are able to buy shares
vesting structures
- time based vesting
- event based vesting
- hybrid vesting
option outstanding
- options has not been granted

Being granted stock options doesn’t mean you’re automatically a shareholder in a company.
Stock option not means share, you need to buy it
exercise
- means you purchase stock at a specified price
- purchase your options
- then company give stock certificate
strike price
- option price you could leverage on to buy stocks
- fixed price
409A valuation
- an analysis of your company’s financials, which determines the value of the company’s shares
- usually done every 12 months
- Fair Market Value - FMV
  - the value of one share of common stock
Spread/ Gain
- the difference between stock price and strike price
PTEP - post termination exercise period
- the amount of time you have to exercise your options after you leave the company
early exercise
- company let you buy everything today
- then you just need to pay taxes at strike price
- 83b election
  - a form sent to IRS
  - you want to pay tax now

ISO shares
- when sell it, tax rate come to be different
qualifying disposition
- 1 year after exercise
- 2 years after option grant date
long term capital gains tax
- 0% 0 20%
short term capital gains
- taxed at ordinary income rates
AMT
- alternative minimum tax
- a low threshold, or floor, defining the minimum amount of taxes you are obligated to pay

For private company
- no need to release any info to public
- less info and more risk comparing with public company investment
who can invest in a startup
- accredited investor
  - more relevant to individuals
  - criteria (either one of them)
    - net worth over a million, not include the primary living place;
    - income net income 200k per year for last 2 years. reasonable expectation in following year; for a family is 300k
    - passing a financial exam, hold a license
- qualified purchaser
  - more relevant for funds, institution,
  - all about investment, purchasing power
  - an entity that has a significant amount of investment capital — their purchasing power

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