Equity Compensation

Your employer would rather pay you in paper than in cash. That is not cynicism, it is the entire design: equity conserves the company’s cash, ties you to an outcome you cannot walk away from mid-vest, and — in a private company — hands you something you cannot sell, value, or borrow against. Sometimes it makes you rich. More often it is a salary cut you agreed to without pricing.

What follows is the machinery, and the machinery matters because every instrument in it taxes you on a different date at a different rate, and several of them can generate a cash tax bill on money you have not received. Learn which date is yours and you keep most of the upside. Miss it and you can end up writing checks to the Treasury for a gain that evaporated before you could sell.