Reply to: Joining a established Ltd, questions

[ft101]

Well you have to weigh up the risk of them not being worth that in 4-5 years time against the extra income you would gain from contracting over that period.

Difficult one...

Yep, thats my delima. Also its difficult to put a price on the bench time - my favourity times of contracting.

Plus, I couldn't legitimately hang out on contractoruk forums anymore

[ratewhore]

Still not sure on this one.. on paper looks like a good offer but i'll be tied to the company for a long time (4-5 yrs).

Well you have to weigh up the risk of them not being worth that in 4-5 years time against the extra income you would gain from contracting over that period.

Difficult one...

[ft101]

An EMI approach is out of the question due to costs (they wont consider it), which brings this back to a ordinary share purchase/option offer.

I'm getting a discount, and the shares are full voting rigths and over a minority interest as you say.

I will eventually be a director.

Still not sure on this one.. on paper looks like a good offer but i'll be tied to the company for a long time (4-5 yrs).

[THEPUMA]

Thanks for the offer, much appreciated. Check out the EMI scheme online, is only for options up to 120k, but apparently these should be 'worth' 1.3m in 4-5 years.

Tbh my 'sceptical bone' is in the red zone on this one

The £120K threshold relates to the value at the date of the grant of the option ie today's value, which may well be below £120K, particularly when you allow a substantial discount (typically 75-80%) for the fact that the options will only (presumably) be over a minority interest.

[ft101]

ft101, it is likely that the best way to achieve this would be via an EMI scheme. If you want to PM me your phone number I can call you and explain the tax implications as it would be quite time-consuming to type it all out on here.

Thanks for the offer, much appreciated. Check out the EMI scheme online, is only for options up to 120k, but apparently these should be 'worth' 1.3m in 4-5 years.

Tbh my 'sceptical bone' is in the red zone on this one

[b0redom]

Do you mean you're taxed on the value of the options even if you don't take them, or you're taxed when you take them and make some money?

You're taxed when you exercise them - ie when you make money from them.

[b0redom]

Pre IPOs are a slightly better bet (sometimes). I worked for one of those too, but in order for the stock to be worth anything at all, the company needs to have been profitable for a good couple of years prior to launch. Even then it's a gamble.

I'd go back to a preIPO, but only if the salary was good, and the job was fantastic. I've been burned far too many times to risk it just for the options again.

[VectraMan]

Whenever I've worked for a company offering options they've just added that at source to PAYE and you're taxed at 40% + ~ 12% NI.

Do you mean you're taxed on the value of the options even if you don't take them, or you're taxed when you take them and make some money?

[Manic]

And of the debts, are you liable at all?

Just a shareholder and ex employee. My shares were a different category to the Directors, i.e. no voting rights.

[THEPUMA]

ft101, it is likely that the best way to achieve this would be via an EMI scheme. If you want to PM me your phone number I can call you and explain the tax implications as it would be quite time-consuming to type it all out on here.

[ft101]

Not long left a company who offered similar setup. Looks like my shares are worthless as said company retracts just as aggressivly as it expanded with lots of debts.

And of the debts, are you liable at all?

[Manic]

Not long left a company who offered similar setup. Looks like my shares are worthless as said company retracts just as aggressivly as it expanded with lots of debts.

[ft101]

Interesting replies folks, thanks. Looking forward to more opinions too.

Just to be clearer on my original post, the company has not yet floated and is privately held. The big idea is eventually to float or be bought out. Buying equity was presented as an option but is not something I am willing to consider.

[b0redom]

Oh, and AFAIK there's no tax relief on options either, so if you save up all your options for 4 years and exercise them all at once, you get hit with a massive tax bill.

[b0redom]

When you get options, they are to buy shares at a strike price. Usually the price of the day you start.

So say on day 1, they're 10p and you get 10,000 over 4 years.

Usually you aren't able to access the options for 12 months, so on month 12 you get the first 2500, then month 13 you get an additional 208 then month 14, an additional 208 etc etc

What usually happens is that you buy and sell at the same time, so you exercise your option to buy at 10p and sell them at the market rate, let's say 20p and pocket the difference eg on month 12:

2500 * (20p-10p) = £250

Whenever I've worked for a company offering options they've just added that at source to PAYE and you're taxed at 40% + ~ 12% NI.

Theoretically if they make buckets of money, and the share price rockets, you're quids in, but don't take a job based solely on them - they're only worth money if the stock price hurtles upwards.

I know people at AOL, Sun, and Yahoo who all have options which are worthless as the strike price is higher than the current market value.