What happens to unexercised ESOP after IPO? I got to know that ESOP gets taxed at the time of exercise so it could lead to a huge financial burden. Also, is it possible to defer taxes after exercis...

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What happens to unexercised ESOP after IPO? I got to know that ESOP gets taxed at the time of exercise so it could lead to a huge financial burden. Also, is it possible to defer taxes after exercising of esops?

Unexercised option after IPO

Software Engineer

Unexercised option after IPO- Grapevine

I’ve not exercised my ESOPs from my previous employer. I am waiting for the company to go public. I quit the company in 2021. What will my tax be if I exercise and sell my stocks at the time of IPO? How much tax can I save if I buy a property?

ESOPs taxation

Analyst

Hi, Say a Series B (US) funded startup gives me 3000 shares which are worth $5/share. It follows the usual vesting period of 4 years. Now assume 4 years have passed and all the 3000 shares are vested but the company hasn't gone IPO. 

Here are my quesions

- When exercising US stocks in India, what is the % of withholding tax I should pay?
- Say if I exercised all the shares and if I decide to leave the company do I get to keep those exercised shares with me forever?

I prefer answers from people who have exercised ESOPs before. I don't want answers like "It depends, Talk to your HR or CA". Appreciate any inputs.

Question on US based ESOPs in India

Truths about ESOP 101 

After working in multiple fast growth startup’s and having been part of multiple buybacks as well as being in the startup ecosystem for a decade I want to put to bear my pov about creating wealth through ESOP. 

Like any other randomised event, ESOP also follows Pareto principle which means a very small number of people within the company ever make sizable wealth that they elevate to the top 0.1% of the country. 

The Pareto also applies with companies; significantly small minority of companies in India have employee friendly policies which enables an employee to create wealth. 

Most startup’s have dark patterns within their esop policy which either locks you in for insufferable durations or forces you to pay exorbitant taxes to gain the right to exercise your esops when you are leaving the company. 

Survivorship bias plays a huge role in enabling the narrative that esop is a great wealth generating tool leading to rude awakening for an employee after they join a company. 

This doesn’t mean you can’t make wealth, it just means don’t get carried away by narratives and take preventable errors in your career. 

Always talk to multiple people in startup’s and ask relevant questions to understand esop policies better. 

Like everything else optimising only for esop for wealth creation will mostly not result in it.

Unmasking ESOP wealth!

Consultant

So say one has 100 ESOPs which a person exercised and converted to say 1000 shares  in say Jan 2024

Now if IPO happens in aug 2024, what will be the long term capital gains tax rate for these shares.

Will the tax rate change if one sells them say in Feb 2025, sept 2025 , Feb 2028 considering tax policy, tax rates to remain unchanged?

How's are captial gains taxed post IPO sell off?

UX/UI Designer

Primarily, my question targets startups which went ipo where you may joined when it was a private company and later it went public and you liquidates it. 
- will your esop units gets multiplied before ipo?
- will exercise price gets increased before ipo?
- what about the tax?
- are there any unknowns and nuances involved which you were not aware of and later realised?
I hold esops in a startup and want to understand how this works during an IPO

How much did you earned through esops via IPO?

Welcome to Personal Finance's Private Community

Please share the knowledge you've about these two!

ESOPs vs RSUs

Product Owner

Where did you work and how much money did you make?

Asking as it looks like a lot of promise of ESOPs and wealth creation has failed employees in this bloodbath slow growth, layoffs, and job changes.

"ESOPs made me rich af"

I have had ESOPS in 2 companies 
#1 - company got acquired ..I got 45 Lacs IN ESOP ...thats 1.5X of my last annualized salary  ( so additional salary for 18 months) 
#2 - Company became unicorn ... I quit and company bought my ESOPs . Got 2 Cr
That is 3X of my annualized salary

Company 1 - I had joined at very early stage ; Company 2 - I joined at mid-stage

Welcome to Software Engineers's Private Community

I have some ESOPs($17k total) at my current company(startup, initial stage), vesting over 4 years with a one-year cliff (25% vested after my first year, monthly after). I have completed 1.5 years here.

I'm not sure if they're actually worth anything(no funding rounds since last 2-3 years, founder is saying he will raise in next 3-4 months), and I'm worried about the taxes when I eventually redeem them. Also I dont know about the redemption process. Could someone explain how this whole ESOP thing work, what the tax implications are, and where I can find more information?

what all should I ask to my manager/HR as we dont have any portal/guide where I can see all these information.
these are the questions I have rn
how to track how much is vested?
how do I redeem them?
can I not redeem them this year, will they still be available to me in next financial year?

ESOPs are confusing

I had a very basic doubt.
For people who've exercised their stock options or have had some similar experience with this in the past, what's best way to limit the tax liability?

My company is registered in the US - would i have to pay taxes to both the governments?

Thanks in advance and have a great day ahead!

Tax liability for vested stock options

If I’ve got an offer with ESOPs, but the vesting starts after a year and the company might go public before I complete a year. Been told by friends that no organisation has ever respected ESOPs that aren’t vested if they go public. What are your thoughts? Anyone who has faced something similar?

Help me understand my ESOPs

Senior Program Manager

Hi Guys, what is the “Exercise event” for the ESOPs allotted by Indian startup’s?

Note: Exercise event means when the vested ESOPs can be allotted.

I have come across a couple startup’s which have a very sketchy Exercise event I.e 4 years after vesting of “all the allotted ESOPs”

So I’m trying to figure out how other startup’s are doing it in BLR/Metro cities in India.

ESOP Exercise Query

Software Developer

I had gotten a few shares of a company I used to work for. Unfortunately the time period to exercise the contract is just 90 days after I leave so that means either I have to lose all the shares since I didn't complete the whole vesting schedule or buy it from them!

I wanted to understand how the tax works in a case like this! The company is still not traded so I can't sell the shares but have to buy it and hold it until IPO!

Tax on ESOPs

Founder

I have recently left Tekion and was considering executing my ESOPs. For executing my ESOPs I need to pay around $3.5 per esop to the company. Should I convert my esops to equity? Am looking for some advice from the folks who might have done this in the past.

Tekion ESOPs Execution

Hey 👋  
  
 I have worked with a lot of my clients who own ESOPs. 
  
 Some points to consider in your case: 
 1. Tekion is not a listed company. Finding a buyer for the shares will be difficult. Considering this, Are you comfortable holding the shares till IPO? 
  
 2. Tax: You will need to pay tax at the time of exercising ESOPs. Again, are you comfortable with paying tax upfront?  
  
 3. If you wish to sell shares through brokers, check if company has right of first refusal. This way, you can a good deal and sell the shares to company (prior to IPO).

Product Manager

I'm currently a front end dev in an early stage startup, been more than 1.5 years here, joined as a UI dev took up frontend. I've just got ESOPs and wanted to know what do people think. Not thinking of switching right now cuz recession, but does ESOP turn to money often. It'll get vested until 2027 btw.

Got ESOPs. Stay or not?

Frontend Engineer

So i got the ESOPs in my current company and now they want me to exercise it as it is mandatory to exercise the ESOP in a certain period of time. What will happen once I exercise it?? Also i am thinking of quitting the company so what will happen to the exercised ESOP if I leave the company??

Please give any resources to understand the complete what, how and when of the ESOPs and general summary regarding it

Can anyone please explain to me the ESOP thing??

How do you understand that Esops alloted in ctc are good enough?
Do companies have them fixed as percentage of ctc (ex. 30% of ctc) or how does it work?

What are the questions i can ask to get a better understanding of the Esops?
One would be current valuation, last buyback time, what else?

Is there any good resource to understand this?

How to evaluate ESOPs?

Have been granted esops recently. What are the critical points that I should be mindful of before signing the esop policy (apart from the regular - vesting schedule, exercise price, etc.)? Anything that I should take note of or ask particularly?

Unexercised option after IPO

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