5 ms·

I don't think that's actually easy to do without causing all current employees to incur significant taxes.

by thfuran 4y ago

pessimizer 4y ago
It's also difficult to win the lottery without incurring significant taxes.
- ska 4y ago
  In that case by definition you have the cash to pay the taxes.
  - Tuna-Fish 4y ago
    No, you don't. The issue is liquidity. If I gift you something that is of substantial value, but cannot be easily sold or used as a security, it can really fuck you over. There are jurisdictions that allow deferring the tax liability in such cases, but the USA doesn't do that.
    - xboxnolifes 4y ago
      Lottery winnings are liquid.
      - Tuna-Fish 4y ago
        Ah sorry, I misunderstood the post I was replying to. I was actually agreeing to it: Lottery winnings are different from major gifts of illiquid assets, because you can always just pay the taxes from the winnings. In any case, you become liable for the tax immediately after receiving the gift/winning. If you cannot do that without selling the asset, and the asset is impossible to sell in the short term, and you cannot take a loan against the asset, your best option can be to refuse the gift. And yes, this is a little bit insane.
        ska 4y ago
        I should have been clearer, but we were pointing out the same difference.
    - deleted 4y ago
      [deleted]
    - alasdair_ 4y ago
      Gifts in the usa are taxable to the giver, not the receiver. (In most cases)
- babypuncher 4y ago
  The difference is that lottery winnings are liquid, you can just pay your tax burden out of the winnings.
  - iepathos 4y ago
    Similarly, taxes are applied to capital gains when stock is sold, not when it is received or bought. The employees would not be taxed just for receiving the stock/ownership, only once they sold it and made it liquid.
    - deleted 4y ago
      [deleted]
    - double_nan 4y ago
      Taxes are due at vesting.
      - davidlumley 4y ago
        To be clear: taxes are due when you receive the shares. For options, that's when you execute/purchase your options not when they vest. edit: (in the US at least)
        johnebgd 4y ago
        The taxes can also be due when you receive your options. That can depend on if you purchase your options or if they are granted to you and entitle you to a discount. YMMV but an NQSO purchase agreement can be your friend.
    - girvo 4y ago
      No, you can absolutely be taxed just for receiving the stock/ownership.
      - ideamotor 4y ago
        If it’s not worth much and it’s spread across many employees, we aren’t talking about much.
- kennend3 4y ago
  Depends on your tax laws. Here (Canada) lottery winnings are tax-free ;) https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/amounts-that-taxed.html https://www.canada.ca/en/revenue-agency/services/tax/individ...
Havoc 4y ago
Throw enough lawyers and structuring at it and you can definitely make it work. Not make the tax go away permanently...but phase it over time & ensure they get dividends along with it to cover bill etc.
- rch 4y ago
  Exactly. I've had enough theoretical conversations about this to know there are organizations who would be happy to help assess any particular situation. Different industry, but it might be worth looking into how New Belgium went employee owned, with apparently equitable results: https://www.forbes.com/sites/christophermarquis/2020/05/01/employee-ownership-results-in-a-pay-out-of-more-than-200-million-to-workers/?sh=1bbdee8e1502 https://www.forbes.com/sites/christophermarquis/2020/05/01/e...
VikingCoder 4y ago
I know nothing... ...but give the current employees voting rights without equity, proportional to their seniority... (Or just 1 vote each.) And then start rolling out equity, maybe, depending.
moffkalast 4y ago
Taxes? You mean the thing poor people pay? /s
vineyardmike 4y ago
I’ve heard of companies doing something similar, but instead it’s a special class of stock (and the original one gets phased out through buybacks etc). This new class basically has a one time dividend that covers a chunk of taxes. Not sure in EVGAs case what laws govern their business and where employees are and what existing structure is… but where there’s a will, there’s a lawyer to make a way.
s1artibartfast 4y ago
I don't think that is true. There are a number of paths to convert to a employee owned coop that doesn't incur taxes for the employees. Easiest would be to convert to some sort of new 501 non profit with employee control. People don't have to pay taxes when they are hired at an employee owned company like winco, and students don't have to pay taxes when they join a housing coop.

I don't think that's actually easy to do without causing all current employees to incur significant taxes.

pessimizer 4y ago

It's also difficult to win the lottery without incurring significant taxes.

ska 4y ago
In that case by definition you have the cash to pay the taxes.
- Tuna-Fish 4y ago
  No, you don't. The issue is liquidity. If I gift you something that is of substantial value, but cannot be easily sold or used as a security, it can really fuck you over. There are jurisdictions that allow deferring the tax liability in such cases, but the USA doesn't do that.
  - xboxnolifes 4y ago
    Lottery winnings are liquid.
    - Tuna-Fish 4y ago
      Ah sorry, I misunderstood the post I was replying to. I was actually agreeing to it: Lottery winnings are different from major gifts of illiquid assets, because you can always just pay the taxes from the winnings. In any case, you become liable for the tax immediately after receiving the gift/winning. If you cannot do that without selling the asset, and the asset is impossible to sell in the short term, and you cannot take a loan against the asset, your best option can be to refuse the gift. And yes, this is a little bit insane.
      - ska 4y ago
        I should have been clearer, but we were pointing out the same difference.
  - deleted 4y ago
    [deleted]
  - alasdair_ 4y ago
    Gifts in the usa are taxable to the giver, not the receiver. (In most cases)
babypuncher 4y ago
The difference is that lottery winnings are liquid, you can just pay your tax burden out of the winnings.
- iepathos 4y ago
  Similarly, taxes are applied to capital gains when stock is sold, not when it is received or bought. The employees would not be taxed just for receiving the stock/ownership, only once they sold it and made it liquid.
  - deleted 4y ago
    [deleted]
  - double_nan 4y ago
    Taxes are due at vesting.
    - davidlumley 4y ago
      To be clear: taxes are due when you receive the shares. For options, that's when you execute/purchase your options not when they vest. edit: (in the US at least)
      - johnebgd 4y ago
        The taxes can also be due when you receive your options. That can depend on if you purchase your options or if they are granted to you and entitle you to a discount. YMMV but an NQSO purchase agreement can be your friend.
  - girvo 4y ago
    No, you can absolutely be taxed just for receiving the stock/ownership.
    - ideamotor 4y ago
      If it’s not worth much and it’s spread across many employees, we aren’t talking about much.
kennend3 4y ago
Depends on your tax laws. Here (Canada) lottery winnings are tax-free ;) https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/amounts-that-taxed.html https://www.canada.ca/en/revenue-agency/services/tax/individ...

Havoc 4y ago

Throw enough lawyers and structuring at it and you can definitely make it work. Not make the tax go away permanently...but phase it over time & ensure they get dividends along with it to cover bill etc.

rch 4y ago
Exactly. I've had enough theoretical conversations about this to know there are organizations who would be happy to help assess any particular situation. Different industry, but it might be worth looking into how New Belgium went employee owned, with apparently equitable results: https://www.forbes.com/sites/christophermarquis/2020/05/01/employee-ownership-results-in-a-pay-out-of-more-than-200-million-to-workers/?sh=1bbdee8e1502 https://www.forbes.com/sites/christophermarquis/2020/05/01/e...

VikingCoder 4y ago

I know nothing... ...but give the current employees voting rights without equity, proportional to their seniority... (Or just 1 vote each.) And then start rolling out equity, maybe, depending.

moffkalast 4y ago

Taxes? You mean the thing poor people pay? /s

vineyardmike 4y ago

I’ve heard of companies doing something similar, but instead it’s a special class of stock (and the original one gets phased out through buybacks etc). This new class basically has a one time dividend that covers a chunk of taxes. Not sure in EVGAs case what laws govern their business and where employees are and what existing structure is… but where there’s a will, there’s a lawyer to make a way.

s1artibartfast 4y ago

I don't think that is true. There are a number of paths to convert to a employee owned coop that doesn't incur taxes for the employees. Easiest would be to convert to some sort of new 501 non profit with employee control. People don't have to pay taxes when they are hired at an employee owned company like winco, and students don't have to pay taxes when they join a housing coop.