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You should work with a lawyer to do it right. (Disclaimer: I'm not a lawyer, but just went through this process...) If the company has no established value, th
by aheilbut 17y ago
You should work with a lawyer to do it right.
(Disclaimer: I'm not a lawyer, but just went through this process...)
If the company has no established value, then when it is incorporated the common shares are assigned an arbitrary, very small par value (like 0.0001 cents each).
The company then sells those shares to the founders. So if the company issued 5M shares, and you were going to get 20%, you'd write a cheque to buy 1M of those shares from the company for $100, and that's exactly what they're worth for tax purposes. If this is restricted stock (ie. subject to vesting) then you need to make an 83(b) election within 30 days of acquiring the stock.
- DenisM 17y agoActually, no. You should work with accountant, not a lawyer. By law the lawyer can not give you a tax advice (it's possible in theory but not in practice) and worrse yet, he will likely not know something important. Obviously if your lawyer is also an accountant you are covered, but this is very rare.
- joshhart 17y agoTo address a previous comment made, I will be getting some upfront equity. This is more of an "incentive to reinvest in the company" kind of deal. Referring back to my example - say I'm usually paid 5k/month but I decide I only need 3k so I ask for 3k and X number of shares. Those shares are assigned .0001 cents since the company has no established value so I now have $3020 in income. Shouldn't I just have to declare $3020 worth of income and the shares are now subject to capital gains?