Evaluate job-offer equity by identifying the award, converting its share count into a fully diluted ownership percentage, and checking the price, vesting, exit terms, liquidity and tax consequences. A grant count or headline company valuation alone cannot tell you what the award is worth. The steps below focus on U.S. employee equity; your plan, grant agreement and applicable law control, and tax details can vary by award and individual circumstances.
1. Find out what the company is offering
Ask for the exact award type and the documents that govern it. An offer letter may describe a proposed grant, while the formal grant may require later approval. Confirm whether it has been approved, when it will be approved if it has not, and what date will determine the strike price for options.
- Request the equity plan and your grant agreement, along with the offer-letter language describing the award.
- Ask whether the award is incentive stock options (ISOs), nonstatutory or nonqualified stock options (NSOs), restricted stock, restricted stock units (RSUs), an employee stock purchase plan (ESPP), or another instrument.
- Confirm the number of shares or options, grant date, and any conditions that could change the grant before approval.
| Award type | What it generally represents | What to clarify |
|---|---|---|
| Stock options | A right to buy shares at a set exercise price, also called the strike price. An option is not the same as owning the underlying share. | Whether the options are ISOs or NSOs, the strike price, vesting terms, exercise rules and post-termination exercise window. |
| Restricted stock | Shares subject to restrictions; ownership and tax treatment depend on the award terms. | When shares are acquired, what restrictions apply, and whether an 83(b) election is available and appropriate. |
| RSUs | A promise to deliver shares or their value when specified conditions are met; the holder does not necessarily own shares at grant. | Vesting and settlement timing, form of delivery, withholding and any sale restrictions. |
| ESPP or another plan | A separate plan-based arrangement; its terms determine how participation and any purchase rights work. | Eligibility, contribution or purchase terms, applicable dates, limits and tax treatment under the plan. |
These are broad descriptions, not substitutes for the governing documents. The Internal Revenue Service distinguishes statutory options, including ISOs and ESPP options, from nonstatutory options in Topic no. 427, “Stock options.”
2. Translate the grant into ownership
For options or shares, the count is meaningful only alongside the share-count denominator used to calculate it. Ask the company for the fully diluted share count and the percentage its grant represents on that same basis. A basic estimate is:
#1 Best Overall
Grant count ÷ fully diluted share count × 100 = approximate ownership percentage
For example, if a company says a grant is 20,000 options, do not infer an ownership percentage from that number alone. Ask what fully diluted share count the company used and check whether the calculation includes issued shares, outstanding options, the reserved option pool and convertible securities such as SAFEs or notes. Ask whether a planned financing or option-pool increase would change the denominator. The treatment of a pool and new financing in a SAFE can affect capitalization calculations; Y Combinator explains these mechanics in its SAFE guide and related documents.
Get the company’s stated percentage and the underlying share count in writing, then confirm that both use the same capitalization assumptions. The percentage is a snapshot, not a guarantee of your future ownership: later issuances or conversions can dilute existing holders.
Rank #2
3. Understand the strike price, share class and cash required
For options, the strike price is what you pay per share when you exercise. Ask for the strike price and the date of the latest 409A valuation for common stock, as well as the price and date of the most recent preferred-stock financing. These figures may differ: investors may buy preferred shares with rights that common shares do not have. A preferred financing price is not an automatic measure of what an employee’s common shares are worth or could be sold for.
The Tool Desk
Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →To estimate the exercise outlay for vested options, multiply the number of options you would exercise by the strike price. That is cash needed to buy the shares, before taxes or fees; it is not the grant’s market value or a prediction of proceeds.
A 409A valuation is relevant to the fair market value of private-company common stock for compliance and option exercise-price purposes. Ask when the latest valuation was set and whether the proposed grant’s strike price will be based on it or a later valuation. Carta’s explanations of equity compensation and stock options provide practical context, but the company’s formal documents and applicable rules govern your grant.
4. Check when the award is earned and what happens if you leave
Vesting determines when an award is earned under its terms. Read the actual schedule instead of assuming a customary arrangement. Record the vesting start date, any cliff, the cadence after the cliff, and what happens to unvested awards if employment ends. Ask whether any acceleration applies on an acquisition or termination, and whether early exercise is permitted if relevant to your options.
For vested options, confirm the post-termination exercise window in writing. The window may be limited, so leaving can create a deadline to decide whether to pay the strike price and exercise. Also ask whether the timing after employment ends can affect an ISO’s tax classification. The grant agreement controls these details; do not rely on a verbal description or a generic schedule.
Crashes, No Sound, or Screen Glitches?
Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minutePC Slower Than It Used to Be?
A free scan shows the junk files, broken settings and background clutter dragging Windows down - then fixes them in one click.Free scan · Windows 10 & 115. Determine whether and how you could sell
Equity may remain illiquid even after vesting or exercise. For a public-company award, ask about settlement mechanics and trading restrictions that apply to you. For a private company, ask whether employees have previously participated in a tender offer or secondary sale, whether another liquidity path is planned, and what restrictions would apply. An IPO, acquisition or secondary transaction may provide a route to liquidity, but none is assured.
For options, potential proceeds generally require that the options vest, that you exercise them when appropriate, and that a later event permits you to sell shares. The company’s last preferred financing price does not promise that common shares can be sold at that price. Share-class rights and preferences can also affect how sale proceeds are distributed.
6. Compare offers on like-for-like terms
Keep guaranteed cash separate from contingent equity. Compare each offer using the same questions rather than treating a company valuation, grant estimate or option count as cash compensation.
| Comparison axis | What to compare |
|---|---|
| Cash certainty | Base salary, bonus terms and sign-on pay, separately from equity that may never become liquid. |
| Instrument and ownership | Options versus shares or RSUs; grant count; and percentage based on a disclosed fully diluted denominator. |
| Price and outlay | Strike price, date of the common-stock valuation, and cash required to exercise vested options. |
| Earning and retention | Vesting start date, cliff, schedule, acceleration, treatment on termination and exercise window. |
| Capital structure | Share class, preferred rights, outstanding convertible securities, option-pool assumptions and possible dilution. |
| Liquidity and tax | Potential sale routes and restrictions, tax timing, withholding and individual tax exposure. |
If you model possible equity outcomes, show the assumptions rather than presenting a single figure as expected compensation. Include ownership after possible dilution, a range of exit values, share-class preferences, vesting, strike cost, taxes and whether a sale is possible. No universal probability-of-success or discount factor can establish the value of a particular offer from the available facts.
Free tools Windows power users keep installed
One-click scans. No signup required.
7. Check tax consequences before exercising or making an election
U.S. federal tax treatment differs among ISOs, NSOs, restricted stock and RSUs, and state tax treatment may differ as well. IRS Topic no. 427 says statutory options generally do not create gross income at grant or exercise, but notes: “You may be subject to alternative minimum tax in the year you exercise an ISO.” NSOs have different tax treatment; the actual award terms and tax rules matter.
RSUs generally produce ordinary income when shares are delivered or settled, or at vesting depending on the terms. Restricted stock may permit an 83(b) election. When applicable, an 83(b) election is generally due no later than 30 days after the restricted stock is acquired; eligibility and consequences depend on the award and tax rules. The SEC-filed plan disclosure at SEC.gov illustrates how an issuer may summarize these tax topics, but it is not a rulebook for every plan. Have a tax professional review the actual grant before exercising options or filing an election.
Quick Recap
Questions to send the employer
- What type of award is this, and is it approved or still proposed?
- How many shares or options are included, and what fully diluted share count and ownership percentage does that represent?
- What does the fully diluted calculation include, including the option pool and convertible securities?
- What are the strike price, date of the latest common-stock 409A valuation, and price and date of the latest preferred financing?
- What are the vesting start date, cliff, schedule and acceleration terms?
- If employment ends, when does vesting stop, and how long would I have to exercise vested options?
- What share-class preferences would rank ahead of common shareholders in a sale?
- Have employees had a chance to sell shares, and what restrictions would apply to a tender offer or secondary transaction?
- Which tax forms and withholding should I expect for this specific award?
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
