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Generally cash is treated as more valuable than sweat equity in all investment cases. For example, people who invest cash typically get preferred stock which ha

Generally cash is treated as more valuable than sweat equity in all investment cases. For example, people who invest cash typically get preferred stock which has higher seniority in the situation where a company gets liquidated, sold for a modest amount, etc. The real question though is what 30K of equity means also. Assuming it's common stock, common stock is often valued at less per share than invested money, which means higher number of shares (for the same valuation), but folks will sometimes talk about it with the preferred share pricing in mind. I suggest you read up more on how investing and stock setups (capitalization tables) are done, and it probably wouldn't be a bad idea to spend $1K on a startup lawyer for advice to understand what you're negotiating if/when you're negotiating.

adrianscott 16y ago
and if you live in a jurisdiction that taxes income, and does it higher than on capital gains... and has 83b elections such as in the u.s., one can factor that into a valuation of opportunity cost... (yearly income taxation versus compounded growth resulting in one-time capital gain taxation)
- xster 16y ago
  In terms of tax, I believe I can be offered "founder's shares", ie shares that have no value (from the taxman's perspective) that vests over a period. Therefore, my income tax for receiving stocks should be minimal. Canada has a 750k tax exemption from capital gain from owning small businesses so tax is not my top worry if it is done properly
  - adrianscott 16y ago
    then 20K of equity can be better from a tax perspective for you, as 30K in income after tax would be 20K or less i imagine right away. at the same time, it's really worth digging into and understand what they mean by whatever equity they're offering, and how they would get to whatever valuation that means. also what % of the company it is that they're offering, what stage is the company at etc., to form your own estimation of valuation of the company etc. looking at % and yr estimation of valuation can be more important than what they're saying... good luck!

adrianscott 16y ago

and if you live in a jurisdiction that taxes income, and does it higher than on capital gains... and has 83b elections such as in the u.s., one can factor that into a valuation of opportunity cost... (yearly income taxation versus compounded growth resulting in one-time capital gain taxation)

xster 16y ago
In terms of tax, I believe I can be offered "founder's shares", ie shares that have no value (from the taxman's perspective) that vests over a period. Therefore, my income tax for receiving stocks should be minimal. Canada has a 750k tax exemption from capital gain from owning small businesses so tax is not my top worry if it is done properly
- adrianscott 16y ago
  then 20K of equity can be better from a tax perspective for you, as 30K in income after tax would be 20K or less i imagine right away. at the same time, it's really worth digging into and understand what they mean by whatever equity they're offering, and how they would get to whatever valuation that means. also what % of the company it is that they're offering, what stage is the company at etc., to form your own estimation of valuation of the company etc. looking at % and yr estimation of valuation can be more important than what they're saying... good luck!