In the US, with enough foresight, they can be purchased through a Roth IRA, which would prevent any tax from being applied. The (major) caveats are three-fold:
1) The money cannot be touched until retirement. So… if it turns out to be Uber and worth hundreds of millions, you can't touch any of it! It's probably a good idea to only put 25-50% of your stock in the account.
2) You can only contribute a tiny amount yearly to an IRA ($6k I think). So, the options strike price must be dirt-cheap for this to make sense.
3) Actually doing it is quite complex, and requires a third-party account custodian. If you're accepting a random startup offer pre-funding (the only time you'd have essentially free options, allowing #2 above not to be an issue), you're unlikely to go through that trouble.
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The huge benefit, however, is that if you do succeed in hitting in big with something that way, you'll have a gigantic Roth IRA balance, tax-free, and you'll be able to use it to make other investments, whose cost basis and profits will all be tax-free.
1) The money cannot be touched until retirement. So… if it turns out to be Uber and worth hundreds of millions, you can't touch any of it! It's probably a good idea to only put 25-50% of your stock in the account.
2) You can only contribute a tiny amount yearly to an IRA ($6k I think). So, the options strike price must be dirt-cheap for this to make sense.
3) Actually doing it is quite complex, and requires a third-party account custodian. If you're accepting a random startup offer pre-funding (the only time you'd have essentially free options, allowing #2 above not to be an issue), you're unlikely to go through that trouble.
--
The huge benefit, however, is that if you do succeed in hitting in big with something that way, you'll have a gigantic Roth IRA balance, tax-free, and you'll be able to use it to make other investments, whose cost basis and profits will all be tax-free.
https://www.google.com/?q=max+levchin+paypal+roth+ira