Employee Stock Options in Private Companies: Complete Guide

Last Updated: January 2026

Types of Equity: ISOs vs NSOs vs RSUs vs Restricted Stock

Private companies offer several types of equity compensation to employees. Understanding what you've been granted is the critical first step to managing your equity effectively.

Incentive Stock Options (ISOs)

ISOs are the most common equity grant for early employees at startups and high-growth companies. They receive preferential tax treatment under IRS rules but come with restrictions.

Key characteristics:

• Tax advantage: If you meet holding requirements, entire gain taxed as long-term capital gains (0-20% federal) instead of ordinary income (10-37%)
• Exercise required: You must pay to exercise options (buy the shares) at the strike price
• Holding requirements: Must hold shares 2+ years from grant date AND 1+ year from exercise date for favorable tax treatment
• $100K limit: Only $100K worth of ISOs (based on FMV at grant) can vest per year
• AMT risk: Exercising ISOs can trigger Alternative Minimum Tax (explained below)
• Employee-only: Can only be granted to employees (not contractors or advisors)
• Expiration: Typically expire 10 years from grant date or 90 days after leaving company

Best for: Early-stage employees planning to hold shares long-term and able to pay exercise cost

Non-Qualified Stock Options (NSOs)

NSOs (also called NQSOs) are more flexible than ISOs but lack the preferential tax treatment. They're commonly granted to contractors, advisors, and executives who exceed ISO limits.

Key characteristics:

• Tax treatment: Spread between strike price and FMV at exercise taxed as ordinary income (10-37%)
• Exercise required: You pay strike price to exercise, PLUS withholding taxes on the spread
• No holding requirements: Can sell immediately after exercise without tax penalty
• No $100K limit: Can grant unlimited amounts
• No AMT: Don't trigger AMT (taxes paid at exercise instead)
• Anyone eligible: Can be granted to employees, contractors, advisors, board members
• Expiration: No statutory limit (often 10 years from grant, 90 days post-termination)

Best for: Contractors, advisors, or those who exceeded ISO limits; employees planning to exercise and sell quickly

Restricted Stock Units (RSUs)

RSUs have become the standard equity grant at later-stage startups and tech companies (think Series D+, pre-IPO). Unlike options, you don't pay to receive RSUs—shares are simply granted when they vest.

Key characteristics:

• No exercise cost: You receive shares for free when they vest
• Tax at vesting: Taxed as ordinary income on full FMV when shares vest
• Withholding: Company withholds shares (typically 22-37%) to cover taxes
• Double-trigger vesting: At private companies, RSUs often require both time vesting AND liquidity event (IPO/acquisition) before you actually receive shares
• Simpler than options: No exercise decisions, strike prices, or AMT complications
• Lower risk: Always have value if company has value (no underwater strike price risk)

Best for: Later-stage company employees; those who want simpler equity with less cash requirement

Restricted Stock (Early Exercise)

Restricted stock occurs when you exercise options before they vest (early exercise). You own the shares immediately, but the company can repurchase them if you leave before vesting.

Key characteristics:

• Immediate ownership: You own shares from day one (subject to repurchase)
• Early exercise: Exercise options at grant (when FMV = strike price, so minimal tax)
• 83(b) election required: Must file within 30 days of exercise to lock in low tax basis
• Repurchase right: Company can buy back unvested shares at your cost if you leave
• Capital gains clock starts immediately: Holding period begins at exercise for long-term capital gains
• Risk: You've paid cash for shares that could be forfeited

Best for: Very early employees (first 10-20) who can exercise for minimal cost and want to optimize taxes

Comparison Table

Understanding Your Grant

When you receive equity compensation, you'll receive a grant agreement (option agreement or RSU agreement). This document contains critical terms that define your ownership. Here's how to read and understand it.

Number of Options/RSUs

Your grant specifies the number of options or RSUs granted (e.g., 10,000 stock options).

Important context: The raw number means little without understanding:

• Total shares outstanding: If company has 10 million shares and you have 10,000, you own 0.1%
• Fully diluted basis: Your percentage will be diluted by future fundraising and option pools
• Current valuation: 10,000 shares worth $100K if shares valued at $10

Always ask: "What percentage of the company does this grant represent?" rather than focusing solely on the number.

Strike Price (Options Only)

The strike price (or exercise price) is what you pay per share when exercising options.

• Set at fair market value (FMV) on grant date using 409A valuation
• Remains fixed for life of option (doesn't change as company value grows)
• Your potential gain = Future share price - Strike price

Example: Granted 10,000 options at $2.00 strike price. Company later valued at $20.00 per share. Your paper gain = 10,000 × ($20 - $2) = $180,000.

Vesting Schedule

Vesting schedule determines when you earn ownership of your grants. Most common structure: 4-year vesting with 1-year cliff.

Detailed explanation in Vesting section below.

Expiration Date

Options don't last forever—they expire after a defined period.

• Grant expiration: Typically 10 years from grant date for ISOs
• Post-termination expiration: Usually 90 days after leaving company (some companies offer 5-7 year extensions)
• Exercise deadline: Must exercise before expiration or options become worthless

RSUs typically don't have expiration—once vested, shares are yours.

Key Documents to Save

Maintain these documents for your records:

• Option grant agreement or RSU agreement: Legal contract defining your equity
• Board consent/approval: Sometimes included, confirms board approved your grant
• Stock plan document: Master plan governing all equity grants
• 83(b) election: If you filed one for early exercise (CRITICAL for tax records)
• Exercise confirmations: Proof of exercised shares and cost basis
• Annual vesting summaries: Track vesting progress over time

Vesting Schedules Explained

Vesting is the process of earning ownership over time. Options and RSUs are granted upfront but vest gradually to incentivize retention.

Standard 4-Year Vest with 1-Year Cliff

The most common vesting schedule in tech: 4-year vesting with 1-year cliff.

How it works:

• Year 0-1 (cliff period): 0% vests. If you leave before 1-year anniversary, you forfeit ALL options/RSUs
• Year 1 (cliff): 25% vests on your 1-year anniversary
• Years 1-4 (monthly vesting): Remaining 75% vests monthly (1/48th per month)
• Year 4: 100% vested

Example with 10,000 options:

• Month 0: 0 vested, 10,000 unvested
• Month 12 (1-year cliff): 2,500 vested, 7,500 unvested
• Month 18: 3,750 vested, 6,250 unvested
• Month 24 (2 years): 5,000 vested, 5,000 unvested
• Month 36 (3 years): 7,500 vested, 2,500 unvested
• Month 48 (4 years): 10,000 vested, 0 unvested

The 1-year cliff protects the company from employees who leave quickly while retaining some value from their equity.

Other Vesting Structures

Monthly vesting from day one (no cliff):

• 1/48th vests each month over 4 years
• Less common at startups (more common at large tech companies)
• More employee-friendly (no cliff risk)

Quarterly vesting:

• Vests every 3 months (16 vesting events over 4 years)
• Simpler administration

Back-loaded vesting:

• Less vests early, more vests later (e.g., 10% year 1, 20% year 2, 30% year 3, 40% year 4)
• Incentivizes longer tenure
• Less common and less favorable to employees

Milestone vesting:

• Vests upon achieving specific goals (product launch, revenue targets, etc.)
• Common for executives or high-impact roles
• Higher risk (may never vest if milestones not achieved)

Vesting Acceleration

Single-trigger acceleration:

• Vesting accelerates upon ONE event (typically acquisition)
• Example: 50% or 100% of unvested options vest immediately upon acquisition
• Rare for most employees (more common for founders and executives)

Double-trigger acceleration:

• Requires TWO events: (1) acquisition/IPO AND (2) termination without cause or resignation for good reason
• More common protection—vesting accelerates if you're fired after acquisition
• Example: If acquired and your role is eliminated within 12 months, remaining equity vests

RSU double-trigger:

• At private companies, RSUs often have double-trigger vesting: time-based vesting AND liquidity event
• You might have "vested" RSUs that don't actually settle as shares until IPO or acquisition
• Check your RSU agreement carefully for settlement terms

What Happens When You Leave

Understanding vesting termination is critical:

• Vested options: You own these and can exercise (typically within 90 days post-termination)
• Unvested options: Forfeited immediately—you lose all unvested grants
• Vested RSUs: Usually yours to keep (though may be subject to double-trigger settlement)
• Unvested RSUs: Forfeited

The Exercise Decision

One of the most difficult and consequential decisions for employees with stock options is when and whether to exercise. This decision involves balancing tax optimization, cash requirements, risk tolerance, and timing.

When to Consider Exercising

Scenario 1: Early Exercise (Restricted Stock)

Best for: First 10-50 employees at very early-stage startups

• Timing: Immediately upon grant, before vesting begins
• Cost: Very low (strike price equals FMV, so minimal spread)
• Tax advantage: File 83(b) election to pay tax on minimal spread; all future appreciation is capital gains
• Risk: Paying money for shares that might be forfeited if you leave before vesting
• Benefit: Start long-term capital gains holding period immediately

Example: Granted 50,000 options at $0.10 strike price on day one. Exercise cost = $5,000. File 83(b) election. Even if company is worth $0.10/share today, if it grows to $20/share at IPO, your entire $1M gain is long-term capital gains (not ordinary income). Massive tax savings.

Scenario 2: Exercise as Shares Vest

Best for: Employees who want to spread exercise cost over time

• Timing: Exercise vested options periodically (quarterly, annually)
• Cost: Moderate and spread over time
• Tax advantage: Start capital gains clock for each batch
• Risk: Moderate—only exercising vested shares you won't forfeit
• Benefit: Dollar-cost averaging into your company; manageable cash requirements

Scenario 3: Exercise Before Leaving Company

Best for: Employees departing who believe in long-term company value

• Timing: During 90-day post-termination window
• Cost: Can be significant (years of vested options × strike price)
• Tax considerations: Large exercise may trigger AMT; need cash or financing
• Risk: High—paying large amount for illiquid shares in uncertain company
• Benefit: Retain ownership instead of walking away from vested options

Scenario 4: Exercise During Secondary Sale

Best for: Employees who want liquidity immediately

• Timing: During company tender offer or via secondary platform
• Cost: Exercise cost can be covered by sale proceeds (cashless exercise)
• Tax: NSO treatment—pay ordinary income tax on spread, then capital gains on additional appreciation
• Risk: Low—you're receiving cash immediately
• Benefit: Liquidity without tying up personal cash

83(b) Election: Critical for Early Exercise

The 83(b) election is an IRS filing that allows you to pay taxes on equity grants at the time of grant/exercise rather than at vesting.

How it works:

1. You early exercise options, receiving unvested restricted stock
2. Within 30 days of exercise, you file 83(b) election with IRS
3. You pay ordinary income tax on the spread (FMV - strike price) at exercise
4. All future appreciation is taxed as capital gains, not ordinary income
5. No additional taxes at vesting

Why it matters:

• Early-stage startups have low FMV (often equal to strike price), so spread is $0 or minimal
• You pay little/no tax upfront by filing 83(b)
• All growth from near-zero to eventual IPO/exit is taxed at capital gains rates (0-20%) instead of ordinary income (10-37%)
• Can save hundreds of thousands in taxes

The 30-day rule is ABSOLUTE:

• Must file within 30 calendar days of exercise
• No extensions or exceptions
• Missing the deadline forfeits the benefit PERMANENTLY
• Set multiple reminders and file immediately

Alternative Minimum Tax (AMT)

AMT is a parallel tax system that can hit employees exercising ISOs hard, even though no cash is received at exercise.

How AMT works with ISOs:

• Regular tax: No tax on ISO exercise
• AMT calculation: Spread between FMV and strike price is "phantom income" for AMT purposes
• If AMT exceeds regular tax, you pay the difference
• AMT rate: 26% up to ~$220K, 28% above

Example of AMT trap:

• Exercise 10,000 ISOs at $1 strike price when FMV = $15
• Exercise cost: $10,000
• Spread for AMT: 10,000 × ($15 - $1) = $140,000
• AMT tax: $140,000 × 26% = $36,400
• You must pay $36,400 to IRS even though you haven't sold shares or received any cash

AMT strategies:

• Partial exercise: Exercise only enough options to stay below AMT threshold (varies by situation, consult tax advisor)
• Exercise early in year: Gives you time to sell shares in same year to generate cash for AMT
• Exercise over multiple years: Spread exercises across years to manage AMT annually
• AMT credit: AMT paid can be carried forward as credit against future regular taxes
• Disqualifying disposition: Sell ISOs within 1 year of exercise to convert to NSO treatment (no AMT, but ordinary income on spread)
• Use NSOs first: If you have both ISOs and NSOs, exercise NSOs first (they don't trigger AMT)

Financing Your Exercise

For large option exercises, coming up with cash can be challenging:

Personal savings: Safest but may not have enough cash available

Personal loan: Bank loan or home equity line to cover exercise + AMT

Exercise financing services:

• ESO Fund: Covers exercise cost + taxes in exchange for share of proceeds at exit
• EquityBee: Crowdfunded exercise financing from accredited investors
• 137 Ventures: Exercise financing for high-value situations
• Cost: Typically 10-25% of final proceeds (expensive but enables exercise when you can't afford it)

Cashless exercise through secondary sale: Platform buyers cover exercise cost, you keep net proceeds

What Your Shares Might Be Worth

Understanding the potential value of your equity helps you make informed exercise and retention decisions.

Current Valuation Reference Points

409A Valuation (Most Relevant for Common Stock)

• IRS-compliant fair market value for common stock
• What your shares are "worth" today for tax purposes
• Updated annually or after material events
• Multiply your share count by 409A price to estimate current value
• Example: 10,000 shares × $8.50 409A = $85,000 current value

See our 409A Valuation Guide for detailed explanation.

Last Funding Round (Preferred Price)

• Price investors paid for preferred shares in most recent round
• Usually higher than 409A (preferred has special rights)
• Common stock typically worth 60-80% of preferred price
• Indicates company's post-money valuation

Secondary Market Transactions

• Actual prices paid for common stock in secondary sales
• Most realistic indicator of what you could sell for today
• Available through platforms like Forge Global

Future Value Scenarios

Your eventual payout depends on the company's exit valuation and your ownership percentage:

IPO scenario:

• Company goes public at $10B valuation
• You own 0.05% (50,000 shares of 100M fully diluted)
• Your stake worth: $10B × 0.05% = $5M (pre-tax)
• Less: Exercise cost and taxes

Acquisition scenario:

• Company acquired for $2B
• Liquidation preferences: First $500M goes to preferred shareholders
• Remaining $1.5B distributed to common
• Your 0.05% of common = $750K (pre-tax)

Down exit scenario:

• Company acquired for $300M (below total capital raised of $500M)
• Liquidation preferences wipe out common stock
• Your shares worth: $0

Understanding Dilution

Your ownership percentage will be diluted over time:

• Fundraising: New shares issued to investors dilute your percentage
• Option pool expansions: Company creates more options for new hires
• Future grants: Ongoing equity compensation to employees
• Typical dilution: 15-30% per funding round for existing shareholders

Example dilution path:

• Year 0: You own 0.20% (early employee)
• Series A: Diluted to 0.16% (20% dilution)
• Series B: Diluted to 0.13%
• Series C: Diluted to 0.10%
• IPO: 0.08% ownership

However, each funding round increases total company value, so your 0.08% of $10B company may be worth more than your original 0.20% of $100M company.

Getting Liquidity Before Exit

Most private company equity is illiquid until IPO or acquisition. However, there are several paths to early liquidity.

Company Tender Offers

The most common liquidity option:

• Company sponsors tender offer for employees and early investors
• Typically annual or biannual events
• Set price (often at or near 409A)
• Limited allocation per person (might only sell 10-25% of holdings)
• Clean process with company approval built-in

Best approach: If your company offers tenders, participate for partial liquidity while retaining upside

Secondary Market Sales

Selling shares through secondary platforms:

• Requires company approval (ROFR process)
• 60-120 day timeline
• Platforms charge 3-5% fees
• Must be vested and exercised shares

See our How to Sell Unlisted Shares guide for complete details.

Secondary Windows

Some companies establish formal secondary trading windows:

• Specific periods (30-90 days) when secondary sales are allowed
• Company partners with specific platform(s)
• Pre-approved buyers and processes
• More streamlined than ad-hoc secondary sales

When NOT to Pursue Liquidity

• Company is months away from IPO (lock-up is only 180 days, wait for public liquidity)
• You're underwater (strike price > current FMV)—no value to realize
• Company blocks all secondary sales
• Tax bill from sale would exceed 50% of proceeds
• You have high conviction in long-term value and don't need the cash

Tax Implications Overview

Equity compensation creates multiple taxable events. Understanding tax treatment helps you optimize timing and structure.

ISO Tax Treatment

At grant: No tax

At exercise:

• Regular tax: $0
• AMT: Spread (FMV - strike) is AMT income

At sale (qualified disposition):

• If held 2+ years from grant AND 1+ year from exercise
• Entire gain (sale price - strike) taxed as long-term capital gains
• Federal rate: 0%, 15%, or 20% depending on income
• Plus 3.8% NIIT for high earners
• Plus state taxes

At sale (disqualifying disposition):

• If sold before meeting holding requirements
• Spread at exercise (FMV - strike) taxed as ordinary income
• Additional gain (sale price - FMV at exercise) taxed as capital gains

NSO Tax Treatment

At grant: No tax

At exercise:

• Spread (FMV - strike) taxed as ordinary income (W-2 income)
• Company withholds taxes or you pay directly
• Must pay withholding even if shares are illiquid

At sale:

• Additional appreciation (sale price - FMV at exercise) taxed as capital gains
• Long-term if held 1+ year after exercise, otherwise short-term

RSU Tax Treatment

At grant: No tax

At vesting:

• Full FMV taxed as ordinary income (W-2 income)
• Company withholds shares (typically 22-37% of shares withheld to cover taxes)
• Your cost basis = FMV at vesting

At sale:

• Only appreciation from vest date to sale is taxed
• Capital gains (long-term if held 1+ year after vest, short-term otherwise)

Tax Planning Tips

• Hold for long-term rates: 1+ year holding period reduces taxes significantly
• Exercise ISOs early: When FMV is low, minimizes AMT exposure
• Time exercises strategically: Spread over multiple years to manage tax brackets
• Consider 83(b) election: For early exercise situations
• Monitor AMT: Work with tax advisor to model AMT before large ISO exercises
• QSBS potential: If your company qualifies as Qualified Small Business Stock, up to $10M gains may be federally tax-free
• Estimated taxes: May need to make quarterly estimated payments after exercise/sale

Important: Tax rules are complex and individual circumstances vary dramatically. Consult a tax professional specializing in equity compensation before making major decisions.

What Happens at Exit

Understanding what happens at IPO or acquisition helps you prepare and avoid surprises.

IPO (Initial Public Offering)

IPO process:

1. Company files S-1 with SEC (public disclosure of financials and business)
2. Roadshow and pricing
3. IPO day: Stock begins trading on exchange (NASDAQ/NYSE)
4. Lock-up period: 180 days (sometimes 90-270 days) where insiders cannot sell
5. Lock-up expiration: You can sell shares on public market

What happens to your equity at IPO:

Vested options:

• Remain exercisable (now for publicly traded stock)
• Can exercise during lock-up period
• Can sell shares after lock-up expires
• May have cashless exercise options through broker

Unvested options:

• Continue vesting on original schedule
• Some companies accelerate partial vesting at IPO

RSUs:

• Double-trigger RSUs settle at IPO (you receive shares)
• Taxes due at settlement (usually withheld)
• Shares subject to lock-up

Lock-up period:

• Standard 180 days from IPO
• Prevents insider selling from crashing stock price
• You own shares but cannot sell them yet
• Lock-up expiration often causes stock price drop (supply increase)
• Consider selling partial position at lock-up expiration to derisk

Post-IPO strategies:

• Immediate diversification: Sell 25-50% at lock-up expiration to derisk
• Systematic selling: Sell percentage over 12-24 months (10b5-1 plan)
• Hold for long-term: If bullish on company, hold for multi-year appreciation
• Tax management: Time sales to optimize capital gains treatment and manage income

Acquisition

All-cash acquisition:

• Acquiring company pays cash for all equity
• Your shares converted to cash at deal price
• Vested exercised shares: You receive cash payout
• Vested unexercised options: May have window to exercise before close, or receive cash for in-the-money spread
• Unvested equity: Typically forfeited or accelerated (check your agreement)

Stock-for-stock acquisition:

• Your company shares converted to acquirer shares
• Conversion ratio based on deal terms
• You become shareholder of acquiring company (may be public or private)
• If acquirer is public, you have liquid stock (subject to lock-up)

Mixed consideration:

• Combination of cash and stock
• Example: 50% cash, 50% acquirer stock

Liquidation preferences and waterfalls:

• Preferred shareholders get paid first (according to liquidation preferences)
• Common shareholders (employees) get remaining proceeds
• In down exits (acquisition price < capital raised), common may receive nothing
• Always understand liquidation preference stack before valuing your equity

Unvested equity treatment:

• Single-trigger acceleration: All unvested equity vests immediately at acquisition (rare for most employees)
• Double-trigger acceleration: Vests if you're terminated or quit for good reason within 12 months
• No acceleration: Forfeited if you leave (even if terminated by acquirer)
• Assumption by acquirer: Your options/RSUs convert to acquirer equity and continue vesting

Earnouts and Retention Packages

In acquisitions, employees often receive:

• Retention bonuses: Cash payments for staying through transition (6-24 months)
• Earnouts: Additional payments based on performance milestones post-acquisition
• Acquirer equity grants: RSUs or options in acquiring company

Common Employee Mistakes

Learn from others' expensive errors. Here are the most common and costly mistakes employees make with equity compensation.

Mistake 1: Letting Options Expire

The error: Leaving company without exercising vested options, which expire 90 days later.

The cost: Forfeiting potentially valuable equity (could be worth $0 or $1M+)

How to avoid:

• Track your vested option count and exercise deadlines
• Before leaving, decide whether to exercise (factor in cost, company prospects, liquidity timeline)
• If you can't afford exercise, consider financing options (ESO Fund, EquityBee)
• Negotiate extended exercise window (5-7 years) before leaving if possible

Mistake 2: Missing 83(b) Election Deadline

The error: Early exercising options but failing to file 83(b) election within 30 days.

The cost: Tens to hundreds of thousands in additional taxes—entire appreciation taxed as ordinary income instead of capital gains

How to avoid:

• File 83(b) IMMEDIATELY after early exercise (don't wait)
• Set multiple calendar reminders
• Send via certified mail with return receipt
• Keep copies and proof of filing forever
• Work with attorney or tax advisor to prepare filing

Mistake 3: Exercising Without Understanding AMT

The error: Exercising large ISO grant without considering AMT, resulting in massive tax bill with no cash to pay it.

The cost: Tens of thousands in unexpected taxes due April 15th; potential penalties for underpayment

How to avoid:

• Model AMT before exercising with tax software or advisor
• Exercise partially to stay below AMT threshold
• Exercise early in year to allow time to sell shares for tax payment if needed
• Make estimated tax payments if exercising mid-year
• Consider disqualifying disposition (exercise and immediate sale) to avoid AMT

Mistake 4: Not Diversifying After Liquidity

The error: Holding 100% of net worth in single private company or recently IPO'd company.

The cost: Concentrated risk—if company fails or stock drops 80%, you lose everything

How to avoid:

• Sell 25-50% of holdings at first liquidity opportunity (tender offer, IPO lock-up expiration)
• Diversify proceeds into broad index funds, real estate, bonds
• No more than 10-20% of net worth in single stock (even your employer)
• Successful founders and employees sell regularly—it's smart, not disloyal

Mistake 5: Overvaluing Equity in Private Company

The error: Treating unvested options at Series B startup as equivalent to guaranteed cash compensation.

The cost: Accepting below-market salary for equity that never materializes (company fails or stays private indefinitely)

How to avoid:

• Negotiate market-rate cash compensation FIRST
• Treat equity as a bonus/lottery ticket, not guaranteed income
• Understand that most startups fail—equity has expected value less than face value
• Ask for more equity if taking below-market cash (and get it in writing)
• Evaluate total compensation (cash + equity) but don't bank on unproven equity

Mistake 6: Not Asking Critical Questions

The error: Accepting equity grant without understanding key terms.

Questions you must ask:

• What percentage of the fully diluted company do these options represent?
• What is the current 409A valuation?
• What was the last funding round price and when?
• How many shares are outstanding (fully diluted)?
• What is the liquidation preference stack?
• Does the company offer secondary liquidity (tender offers)?
• What is the post-termination exercise window?
• Are there any unusual terms (repurchase rights, transfer restrictions)?

Mistake 7: Exercising Too Early at Risky Company

The error: Putting $50K into exercising options at early-stage company that goes bankrupt.

The cost: Losing entire exercise investment (can't deduct full loss against other income)

How to avoid:

• Only exercise what you can afford to lose completely
• At very early stage, wait until company proves traction before large exercises
• Balance tax optimization (early exercise) with risk management (waiting)
• Diversify—don't put all spare capital into one company's stock

Mistake 8: Not Getting Tax/Legal Advice

The error: Making major equity decisions (early exercise, large sale, exercise before leaving) without professional guidance.

The cost: Paying 2x the taxes you needed to, or violating securities laws

How to avoid:

• Hire tax advisor specializing in equity compensation ($300-$2,000 per consultation)
• Review grant documents with attorney at hire ($500-$1,500)
• Model tax scenarios before exercising large amounts
• Professional advice pays for itself 10x over in tax savings and avoiding mistakes