Leaving a Startup With Stock Options: 4 Situations and Who Fits Each

Leaving a Startup With Stock Options: 4 Situations and Who Fits Each

Leaving a startup with stock options starts a clock that most employees do not know is running. Your plan sets a window to exercise after your last day, the tax result depends on the type of option, and the cash you need can be large relative to what the shares are worth on paper. A decision made in a rush, or by default because nothing was decided, is often the expensive one.

Two firms in our featured program are written up here. Doug Johnson CPA, a Los Angeles firm that lists Equity Compensation among its specialties, may fit where the question is the option itself and the tax cash it creates. Iota Finance, a Florida accounting, tax and fractional CFO firm that lists Equity Compensation and Digital Nomads, may fit where the question touches a move across borders. Neither profile names departures or exercise windows, so ask each firm what it has handled. Every firm named is a vetted Sam's List member. The firms written up below are paying members of our featured program, and payment does not buy the language we use or its reviews. How we picked is at the end.

The four situations are not ranked and neither are the firms.

Situation 1: Leaving a Startup With Stock Options Under the ISO 90-Day Rule

You hold incentive stock options (ISOs) and you are leaving. To keep ISO treatment, you generally have to exercise within three months of the end of employment, which is where the ISO 90-day rule comes from. After that, an option that is exercised is generally treated as a nonstatutory option instead, with different tax. Your plan may set a shorter window than the tax rule.

An ISO exercise generally creates no regular tax at the time, but the spread between the exercise price and the value of the shares can count for the alternative minimum tax, which can mean a bill in a year when you sold nothing. The holding periods that decide whether a later sale gets favorable treatment run from the grant and exercise dates.

Doug Johnson CPA may fit. Equity compensation is a listed specialty, and the firm positions itself for high earners with it.

The limitation: the alternative minimum tax depends on your whole return, and the figures change. Ask the firm to run the numbers for your situation before you exercise, and do not rely on a rule of thumb.

Situation 2: Leaving a Startup With Stock Options and a Longer Post-Termination Exercise Window

Some companies give departing employees more than 90 days. The post-termination exercise window in your plan or award agreement is the controlling document, and some plans extend it to months or years, usually with a conversion of ISOs to nonstatutory options. A longer window buys time to decide, but it does not remove the cost of deciding.

When you exercise nonstatutory options, the spread is generally ordinary income in the year of exercise, and it may be reported through payroll even if you no longer work there. You also pay the exercise price. For a private company the shares may not be sellable, so the tax and the price come out of your pocket against shares you cannot sell.

Doug Johnson CPA may fit for the tax side, and Iota Finance, which also lists Equity Compensation and describes fractional CFO work, may fit for the question of how to fund and time the exercise.

The limitation: neither profile describes private-company exercise planning in detail. Ask each how it values the tradeoff when the shares cannot be sold, and who covers the cash question.

Situation 3: Leaving a Startup With Stock Options While Leaving the Country

You leave the job and also the US. Two questions arrive together. First, how the US treats the options, which generally depends on how much of your vesting service was performed in the US and on your residency when you exercise. Second, how the country you move to taxes the same event, and when.

The two countries may tax on different dates, at different values and at different rates. A treaty or a foreign tax credit may reduce double tax, but you generally have to claim it, and the two sides do not always agree on the numbers. The plan's window does not pause because you moved, and withholding can be harder to get right when you are abroad.

Iota Finance may fit. It lists Digital Nomads and Equity Compensation as specialties and serves clients nationwide.

The limitation: the profile does not describe treaty claims or another country's rules, and those are for a local adviser. Ask who coordinates between the two sides before you leave, not after.

Situation 4: A Company That Shuts Down or Is Acquired After You Leave

You left, you did not exercise and the company then shut down or was acquired. If it closed, unexercised options generally expire with no value and no deduction for the lost option. If it was acquired, what happens depends on the deal: options may be cashed out, converted, or cancelled, and a former employee's options are not always treated like a current employee's.

If you exercised before the event, the picture is different: you hold shares, which may be paid out, or may be worth nothing, and the exercise has already had tax consequences, ordinary income for nonstatutory options or possible alternative minimum tax for ISOs, whatever the shares later turn out to be worth. The order of events, and not just the totals, drives the result.

Doug Johnson CPA may fit for the equity tax questions, and Iota Finance may fit where the proceeds or the move involve more than one country, though its profile does not describe cross-border option work beyond its Digital Nomads specialty.

The limitation: whether a loss on shares is deductible, and in what amount, depends on rules specific to your facts. Ask before you assume a loss will offset other income.

Where Doug Johnson CPA Fits

Doug Johnson CPA is based in Los Angeles, founded in 2024, with three employees, serving clients nationwide. Its live profile positions the firm for growing businesses in the $250,000 to $10 million revenue range and for high earners with equity compensation.

Doug Johnson CPA has 15 verified client reviews on Sam's List. Each review is submitted by an individual who identifies as a client of the firm and rates it on communication, subject-matter knowledge, and overall satisfaction. Reviews reflect those individual experiences and do not represent an endorsement by Sam's List. Doug Johnson CPA is a paying member of our featured program, and payment does not buy its reviews. Ratings and rankings are not indicative of future performance or results.

The limitation, plainly: the profile does not mention exercise windows or departures by name, so ask what the firm has handled. It lists minimums of $250,000 in income and $250,000 in revenue, so a smaller earner may fall outside what it takes on.

Where Iota Finance Fits

Iota Finance is a Florida firm, founded in 2022, with seven employees, serving clients nationwide. Its live profile names Igor Tutelman CPA as Managing Partner and lists Cryptocurrency Investors, Digital Nomads and Equity Compensation as specialties. It describes monthly accounting, tax and fractional CFO work for small businesses, startups and entrepreneurs.

Iota Finance has 14 verified client reviews on Sam's List. Each review is submitted by an individual who identifies as a client of the firm and rates it on communication, subject-matter knowledge, and overall satisfaction. Reviews reflect those individual experiences and do not represent an endorsement by Sam's List. Iota Finance is a paying member of our featured program, and payment does not buy its reviews. Ratings and rankings are not indicative of future performance or results.

The limitation, plainly: the profile does not mention exercise windows or option departures by name, so ask whether the firm has handled them. It lists minimums of $200,000 in income, $500,000 in revenue and $500,000 raised, so an individual employee may fall outside them.

Frequently Asked Questions

How long do I have to exercise stock options after leaving a startup?

Your plan and award agreement set the window. For ISOs, the tax rule generally gives three months to keep ISO treatment, and some plans use 90 days for all options. Some companies extend it. Read your documents or ask the company in writing.

What is the ISO 90-day rule?

It is the general requirement to exercise ISOs within three months of the end of employment to keep ISO tax treatment. After that, an exercise is generally treated as a nonstatutory option. Your plan may set a shorter window than the tax rule.

Do I owe tax when I exercise options after I leave?

It depends on the type. Nonstatutory options generally create ordinary income on the spread at exercise. ISOs generally create no regular tax at exercise but can create alternative minimum tax. Run the numbers before you exercise, since the tax is due even when the shares cannot be sold.

What happens to my options if the startup shuts down?

Unexercised options generally expire with no value and no deduction. If you already exercised, you own shares that may be worth little, and the exercise may already have triggered ordinary income tax or alternative minimum tax. Talk to a tax professional about any loss.

Before you decide, gather your grant and plan documents, your exercise price and vesting schedule, the latest valuation you can find and your last day of employment. You can browse accountants on Sam's List, including the firms above, and ask each which of the four situations it handles most.

How We Picked These Firms

You should be able to check our work, so here is how this post was built.

The pool. The pool is the two firms written up here, both vetted Sam's List members in our featured program. Their profiles list Equity Compensation among their specialties. This is not a survey of every accountant who handles stock options, and many Sam's List members and other firms not written up here could fit.

How it is organized. The four situations are not a ranking, and neither are the firms. Each is placed where its profile appears to fit the question. We could not confirm from either profile that it handles departures or exercise windows, and say so.

What review counts mean here. We cite each firm's verified review count and its date from its profile. A count shows how many clients wrote something down. It does not measure technical quality, and a firm with fewer reviews is not a weaker one.

What payment does and does not buy. Listing on Sam's List is free, and so is being named in this article. The firms written up here are paying members of our featured program, which is why they get a write-up. What payment does not buy is the language we use about a firm, its review count, or a promise that it fits you.

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About the author: Kimberly Green is the cofounder of Sam's List, where business owners and high earners find vetted CPAs, financial advisors, and fractional CFOs. She's met one-on-one with 400+ financial professionals and writes from the real data behind thousands of client-advisor matches. Ask her anything about finding an accountant - she's heard it all, including the questions people are afraid to ask.