Would you rather have stock options or restricted stock units? If you’re not sure how to answer that, you’re not alone! Here’s a quick breakdown of their differences: 💡 Stock Options ⚬ Right to buy shares of the company you work for at a set “strike price” ⚬ Only valuable if the stock price > the strike price ⚬ Typically vests over several years (e.g., 25% annually) ⚬ Might be taxed at exercise (NSOs) and again at sale ⚬ Liquidity depends on a market to sell shares and often requires an IPO or acquisition if the company is private 📊 Restricted Stock Units (RSUs) ⚬ Shares of the company you work for that are delivered at vesting — no purchase needed ⚬ Vest based on time or performance ⚬ Taxed as ordinary income at vesting; any gain after is taxed as capital gains ⚬ In private companies, shares often can’t be sold until a liquidity event Each has distinct tax and liquidity considerations. Understanding how they work can help you better align your compensation with your financial strategy. If you have an equity comp or are evaluating a new offer, we’re happy to review your package and discuss how it fits into your overall financial strategy. After some initial work, a tax, legal, or accounting professional can help you better understand any future tax implications.
