About RSU and share options (stock option)

Recently, when communicating with some headhunters, they referred to the concept of RSU, which was specifically searched for, and the difference between stock options and shares option was as follows:

RSU and option are generally realized yearly, such as the offer letter signed three years, write to you 1000 shares, the first year can give you 25% the second year to 40%, the third year to 35%. RSU is the real stock, that is, when you get the stock, this is completely yours, there will be several times a year trading window is open, this time you can sell, when close, you cannot trade (thanks to @memoria Reminder), your income = the price of selling * Number of shares sold-broker commission-tax; While option is not the same as RSU, it is not earning a full stock but earning a difference. option has a buy price when the company assigns you, when you sell the proceeds = (sell price-buy price) * Number of shares sold-broker commission-tax. When the price of the sale is greater than the price you buy (also deduct commission, tax), the income is positive, when the stock has been down until the expiration date of your right, the price is lower than the company gives you a rights issue price, then you gain 0 (should no one will go to high prices to buy low price to sell it, can give up exercising
Restricted stock units (RSU) are usually limited to a certain period of time not to sell, or to be listed in circulation. Usually 3-4 years. Limited stock units (RSU) is also a popular incentive for workers, because the value of the stock is usually more than 0, and the option is not necessarily, may be equal to zero, so the limited stock unit (RSU) has a more explicit incentive content and benefits for employees.
RSU (Restricted stock unit), which can be called restricted stock units, differs from ordinary stocks. Employees are required to work for an agreed period of life, after they have been assigned (vest) shares can be realizable, if the company has been listed or acquired. Joseph Holy
Links: https://www.zhihu.com/question/19853693/answer/55816929
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What about startups that haven't been listed yet?

Basically two classes, RSU or stock Option.

RSU. Even if the company is not listed, or can give staff hair rsu, the mainstream practice is four years average, 25% a year, the next three years to take the remaining 1/36. In particular, it is important to note that RSU can only be made when a start-up is already very high, such as Uber now, and engineers who have worked for a few years have already received the rsu of value 50w~80w+. Looking back, Facebook was the pioneer of RSU before it went public, and since then it was the golden age of Internet entrepreneurship, where star startups, valued at tens of billions of, are no longer rare and rsu are becoming more popular.

The advantage of RSU is that it is simple and clear that the risks are small and traded on the market. What are the drawbacks? Tax weight. Similar to the previous example of Xiaoming, once the company is listed, the employee's assigned RSU will be taxed as a general income tax. In view of the general total value of RSU provided by startups, the tax rate for this part of the income is based on income tax. If you save a large amount of RSU before the company is listed, almost half of the listing is immediately deducted from the tax. Miserable.

Stock Option. This is the highlight of this article. There are many types of options, and there are many differences between publicly traded options and company options, but the essence is the right to buy (sell) stocks at a fixed price.

There are two main types of stock option for startups, and the following are the areas for discussion:

• ISO (Incentive Stock Option)

• NSO (non-qualified Stock Option)

There is a big difference between the two in tax-accounting. But the trend is that more and more startups choose NSO as the way to distribute stock option.

Let's talk about the general phase of stock option:

1. You are hired by the company and are given a considerable amount of options. For example, you can buy 10000 shares of option with the $5/share price.

2. As we described earlier, the given options have a schedule of allocations, and the mainstream approach is to work full year to get 25%, and 36 months to get the remaining 1/36 each month.

3. At a certain point in time, you decide to exercise the right to option, that is, to buy the company stock at the right price. Profits can be obtained by selling the shares of the proceeds at the same time or later.

To summarize:

• If the company offers RSU, well, you don't need to think about it, just stay up and wait for the stock to be sold, if you're in California, be prepared: basically half the income goes to tax.

• If the company provides stock Option and is NSO. You can not do too much, and so after the company listed, well calculate their own income, select a part of the option to do the right to sell shares and profit. If properly controlled, taxes may be slightly less than RSU.

• If the company provides stock Option and is ISO, unless it is a very early employee, be cautious about using early risers (early exercise) and advise a professional tax officer before making a decision.

Whether it is rsu/option, if the company has no way to go public or be acquired, or you have left before, these rsu/option are worthless.

Similarly, high risk means high returns. Startups offer a lot of rsu/option to their employees than big companies, and you just have to get out of the company or be bought, giving you a natural reward.

RSU Negotiations, it is important to consider the dilution problem, can refer to https://www.huxiu.com/article/150891/1.html.

About RSU and share options (stock option)