The answer lies in the paper work that you signed when they issued the stock. Typically, when you leave the company, you have 30-90 days to sell the stock, and if the stock is not publicly traded you may have to selll the stock back to the company.
Sometimes the agreement is that you only have to buy the stock.
Actually this depends on whether you have Incentive Stock Options or Non-qualified. I am assuming you have ISOs.
Hi, there. I see you are in cat. Do you know if these are NQ's or ISOs?
If they are non-qualfied stock options, then you will realize taxable income upon the sale. It doesn't matter who you sell it to.
The botXXXXX XXXXXne is that I think you are stuck.
Are you trying to see if you can "transfer" the options to the new employer?
You cannot transfer the options (that's in the agreement you signed.)
Do you have clause that says you must excercise the options within so many days of departure?
Is this company publicly traded?
It says you are typing but I don't see anything.
Okay, they are ISOs.
And you would like to excercise the options and not incur a tax hit?
Do you have the funds in hand to pay for the option excercise or are you short money?
Are the terms of your agreement, such that you can excercise the options and NOT have to sell the stock back to the company?
Private companies may require you to do this. The reason is because if too many people hold their stock, they beceom
a "public company". They don't want to do this till they are ready.
But they can't purchase the options!
Okay, but I bet you cannot "transfer" the options. You must be the one to excercise them.
And just to be clear you have a timeframe within which you need to excercise the ISOs.
If you don't have to excercise them, then just hold on to them. (Case closed!) but I assume you are under a time limit to excercise.
Okay and there should be a non-transferability clasue.
(I am not trying to be difficult, I am trying to "parse" this so we can see what options you really have.)
But your original question involved the company "getting the options", or did I mistake that.
If the new company is paying for them, then YOU are excercising them and they
are just loaning you or bonusing you the money.
Then after the excercise, YOU would own the stock.
I'm trying to step through this one baby step at a time. Whether it's a loan or a bonus, really isn't my focus at this time.
So, we're in agreement that you want to excercise the ISOs and own the stock and you just want to find out if the new company can get the money to you somehow.
Your original question asked if the new company could "purchase your options" that's why I am confused.
If the new company issues a check, it is either a taxable bonus to you or a non-taxable loan to you--the fact that they write it to your old employer is not material.
They are paying your bill.
If I had a comopany instead of paying me, pay my monthly mortgage, or buy something for me, it is still taxable income to me.
I have an idea, though.
I'm not sure your new company will go for this.
Do you want to hear my idea?
\Like I said, I am not sure they would go for this.
You get a loan from the company to excercise the options. The new company and you agree that the loan is "secured" by the stock you have been issued.
If the stock goes up in value, you pay back the loan when you sell.
If the stock goes down in value (or to zero), the company forgives the loan.
Forgiving the loan will be taxable income at that time.
By the way, is the "market value" of the stock very different from the excercise price?
I didn't know your standing with them. For all know, you're their "walk on water" new head of R&D and can command this type of thing.
Okay, you understand about alternative minimum tax on ISOs then.
I felt like I had to mention for completeness sake.
If you're all set, can you please accept the response.