What happens to an employee's equity when they leave a company?

Leaving a company doesn't mean losing everything, but what happens next depends on what's vested, what isn't, and how quickly the employee acts.

What happens to unvested equity

In most cases, any unvested shares or options are forfeited when employment ends. The exact terms depend on the specific grant agreement and equity plan, some companies include acceleration clauses that vest additional shares upon termination, so employees should review their grant details in Carta rather than assume a standard outcome.

The post-termination exercise period (PTEP)

Vested stock options don't have to be exercised immediately, but they don't stay exercisable forever. The post-termination exercise period (PTEP) is the window an employee has to exercise vested options after leaving, and it's set by the company in the original grant agreement, so it varies from grant to grant.

For incentive stock options (ISOs) specifically, there's a separate IRS rule to know: an ISO exercised more than 90 days after termination loses its favorable ISO tax treatment and is taxed as a non-qualified stock option (NSO) instead. This is a federal tax rule, not a Carta or company policy, and it applies regardless of how long the company's own PTEP is.

Managing a Carta account after leaving

Employees keep access to their Carta holdings after termination, as long as they can still access the email address associated with their account. If that email is a company address that gets deactivated, they should update it to a personal email before losing access.

Why it matters

Missing the exercise window means forfeiting any vested options that weren't exercised in time. And for ISO holders, waiting past 90 days doesn't forfeit the option, but it does change the tax treatment, often making it more expensive to exercise later.

If an employee is stuck

Direct them to their company administrator for the exact PTEP length on their specific grant. Carta Support can help with account access issues, like updating the email on file after a company address is deactivated.