Avoid ISO Payroll Taxes

At a liquidity event such as an M&A, unexercised stock option grants are typically cashed out for a value equal to the spread between the exercise price and the liquidity price per share net to common stockholders.  When the company executes such a payout, it is considered a compensation event and subject to payroll taxes. This includes both the employee’s medicare and social security taxes as well as the employer’s matching