What Happens to Your Stock Options When You Leave a Company?
Stock options and Restricted Stock Units (RSUs) can be a valuable part of your compensation, but many employees assume they’ll keep them after leaving a company. In reality, different rules apply depending on whether your options are vested, unvested, or subject to company events like an IPO or acquisition. Understanding how your stock options and RSUs are affected when you leave your job can help you make informed financial decisions.
1. Vested vs. Unvested Stock Options and RSUs: What You Get to Keep
Stock Options (ISOs & NSOs)
Vested Options: You typically retain the right to exercise these within a set period after leaving.
Unvested Options: These are usually forfeited when you leave.
RSUs
Vested RSUs: Once RSUs vest, they convert into company stock, and you own them outright.
Unvested RSUs: Typically, you lose unvested RSUs when leaving, unless special arrangements exist (such as continued vesting for executives).
✅ Key Takeaway: Vested options and RSUs are yours to keep, while unvested grants are typically forfeited unless your company has special policies.
2. Deadlines to Exercise Stock Options Post-Termination
Once you leave, you must act within a specific time frame to exercise your stock options.
ISO (Incentive Stock Options) Exercise Window
Standard Deadline: 90 days after termination.
If you miss this window: ISOs convert to NSOs, losing tax advantages.
NSO (Non-Qualified Stock Options) Exercise Window
Company-Specific Deadlines: Some companies allow longer periods (e.g., 6 months to several years).
No tax advantages lost if exercised after 90 days, but still taxed as ordinary income.
✅ Key Takeaway: Act quickly on ISOs, as they expire 90 days after you leave, or they convert to NSOs, changing their tax treatment.
3. What Happens in Layoffs, Acquisitions, and IPOs?
Your stock options and RSUs can be affected by company events such as layoffs, acquisitions, or an IPO.
Layoffs
Some companies offer an extended exercise period for laid-off employees.
Unvested stock options and RSUs are usually forfeited, but check severance agreements.
Acquisitions & Mergers
Your options may be converted into shares of the acquiring company.
In some cases, companies offer a cash buyout for vested shares.
Unvested stock may continue vesting or be forfeited, depending on the terms of the deal.
IPO (Initial Public Offering)
Lock-up periods may restrict when you can sell vested RSUs or exercised options (typically 6 months post-IPO).
Unvested RSUs and options may still follow the original vesting schedule.
Your tax liability may change if stock prices rise significantly before you sell.
✅ Key Takeaway: Major company events can impact when you can sell stock and whether unvested options continue vesting, so review all agreements carefully.
Final Thoughts: What to Do When Leaving a Company
Leaving a company is a critical moment for managing your stock options and RSUs. To protect your equity and minimize taxes:
✔ Check your company’s stock plan – Understand deadlines and forfeiture rules.
✔ Act quickly on ISOs – Exercise within 90 days if you want to keep tax benefits.
✔ Consider cash flow and taxes – Exercising options may require significant upfront costs.
✔ Review merger, layoff, or IPO terms – Company events may change how you access your stock.
✔ Consult a financial advisor – Get expert guidance to make the most of your stock options and RSUs.
By planning ahead, you can maximize the value of your stock options and avoid losing out on valuable equity when transitioning to a new job or opportunity.
