Have a Tax Question? Ask a Tax Expert
Yes, it is common practice.
The reason it is done this way is that the law requires than the Company withhold the applicable taxes and report that withholding on your W2. If you make arrangements to deposit the required withholding from another source of your funds and keep all the stock without selling any of the shares, that is permissible, but that will require that you make that deposit before the stock is issued.
What the Company is doing is the normal way that the stock options are handled when they are exercised to acquire the related Company stock.
You do not have the option of paying the tax yourself rather than having the tax deposited with the Company and reported on your W2. When you file your income tax return you will pay any additional tax due or receive a refund for any tax overpaid through withholding.
Well, that's strictly an investment decision and would depend upon your evaluation of the Company's prospects for growth and profitability. In these recently "public" companies, personally I like to look at "Insider Trading" and see what the officers of the Company are doing with their stock. It's common for the officers/founders/stockholders to sell/dispose of some of their stock to raise funds for personal needs, funding college educations, making gifts to family, investment diversification and other requirements. However, beyond that if they are making additional investments in the Company, it's at least some indication of what they consider the company's prospects are. If you have a limited investment portfolio at this point (of course I have no idea of your financial/investment situation), then you might consider selling some of the shares in order to make alternative investments to diversify your portfolio. It's never good to put all your eggs in one basket.
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