There's tax due on incentive stock options (ISOs, I think I have the name right?) when you exercise the option. So, if my layman understanding is correct, you get an offer to pay a discounted price on company stock whenever you want (usually based somewhat on valuation when you're hired). Then, the company's valuation increases (all on paper and in private, not public market price corrections, just whatever investors think is "fair"), and you exercise your stock option. The difference between the price you paid (your option price) and the value of the share (as determined by the private valuation) is now taxable income in the eyes of the IRS. You will owe taxes on stocks that might still end up being worthless, and your employer also has the power to prevent you from selling them before they go public/are bought out.