WilmerHale Counsel Ciara Baker and Partner Kim Wethly share a look at some of the traps related to early exercise of stock options and offer practical considerations.

Since the 1849 gold rush, California has had a reputation as a great place to seek—and find—your fortune. The Golden State is home to the Golden Gate Bridge, the Golden State Warriors and, in Silicon Valley, golden opportunities. But, as you might suspect, California sometimes operates like its own country, with laws that aren’t like anyone else’s.

As the founder of a , you’d love to reward your employees with hefty holiday bonuses, but your business is bootstrapped and cash is, undoubtedly, in somewhat short supply. So you might be looking for holiday gifts that telegraph yet don’t break the bank. Here’s the solution that many founders are coming up with: They are giving employees the gift of extra time to exercise their vested after they leave. Before you join the crowd, let me say this: It’s a terrible idea on every level.

One question almost all founders will run into—whether at the time of incorporation, when hiring their first employee, or just before raising the first round of financing—is how to structure the pool and create incentives for employee recruitment and . often find themselves in a fierce battle for talent, pitted against bigger, cash-flush companies that can higher salaries than can afford to pay. This is why equity incentives—in the form of —are so popular from a recruitment perspective.

In our initial meetings with entrepreneurs, we frequently spend a significant amount of time advising on founder vesting. Those discussions can be much shorter. Not because we don’t want to spend the time with you, but because in most the cases, the best thing to do is what’s standard. And as a founder, your time is better spent building your company.