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Grellas:

You mention the preference order as:

1) unrestricted grants

2) restricted stock at a cheap price with a timely 83(b) election

3) ISO, with low strike price and early exercise

4) ISO or NQO without 90 day tail on termination

5) RSUs

How do ISOs with a 90-day tail on termination compare? If I understand correctly, those are the most common.



Actually, apologies for being sloppy on this one (in having dashed this off in just a few minutes) - under tax laws, you can't have an ISO without a 90-day tail. This should therefore read "4) NQO without 90 day tail on termination". I would probably put ISO with 90-day tail and no early exercise as #5. It really is a toss-up, though, because the ISO does retain significant tax advantages for anyone who can keep his option exercises out of AMT. I give the NQO (with no tail) the edge here only if AMT becomes a factor, which it does for many people, primarily because it gives you have the flexibility to keep vested options alive long after leaving your employment. Hope this helps.




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