ISOs: Annual Tax Reporting Requirement

If your company has had employees exercise incentive stock options (“ISOs”), you are required to report certain information to the IRS and the optionee about the exercise. ISO Tax Reporting There is no income or employment tax withholding required on the exercise of an ISO. But there is an annual tax reporting obligation to the … Continue reading ISOs: Annual Tax Reporting Requirement

Immediately Exercisable ISOs: The Problems

By Joshua Levy and Joe Wallin A lot of companies, including a large portion of Silicon Valley startups, grant new hires immediately exercisable ISOs (incentive stock options) with the expectation that many will exercise their options “early” for favorable tax treatment. In fact, employees are often given a kit with all the paperwork, including everything … Continue reading Immediately Exercisable ISOs: The Problems

Stock Options: ISOs vs. NQOs

Q: Can a member of the board of directors receiving a stock option as compensation for board member service receive an incentive or statutory stock option (an “ISO”)? A: No. A board member who is just a board member, and not otherwise an employee of the company cannot receive an ISO. Only employees can receive … Continue reading Stock Options: ISOs vs. NQOs

Washington State Equity Crowdfunding Update

Good news! Senators Fain and Mullet have sponsored SB 5680 in the Washington State Senate. This is the same bill as HB 1593 in the House. The bill would make important technical improvements to Washington State’s equity crowdfunding law The highlights of the bill include: Allowing Delaware corporations to use Washington State’s equity crowdfunding law. … Continue reading Washington State Equity Crowdfunding Update

Indexing the Accredited Investor Standard to Inflation: A Bad Idea

Now that the election is over, it is unclear, at least to me, which direction startup public policy will take. It is in all of our best interests that we have a startup public policy that promotes innovation and creativity. Too often we have laws that slow us down, impede us, or flat out make … Continue reading Indexing the Accredited Investor Standard to Inflation: A Bad Idea

Qualified Small Business Stock: Redemption Issues

By Susan Schalla & Joe Wallin If you are not familiar, Section 1202 of the Internal Revenue Code provides startup founders and investors with a very significant potential tax break on the ultimate sale of their stock, if the stock is “qualified small business stock.” What is the Tax Break? The tax break is a … Continue reading Qualified Small Business Stock: Redemption Issues

Warrants: The Tax Story

By Dan Wright of Clark Nuber and Joe Wallin Warrants can be confusing from a tax point of view. There are a couple of reasons for this. But the primary reason is probably because how a warrant is taxed is driven by the factual circumstances under which it was issued. Was it issued as part … Continue reading Warrants: The Tax Story

Stock Option Plan Administration: A Guide

Administering a stock option plan requires regular attention to compliance obligations. Events to Watch Out For There is work to do when: the board of directors takes action to grant stock options, which can occur either at regularly scheduled board meetings or at any time at special board meetings or actions by unanimous written consent; … Continue reading Stock Option Plan Administration: A Guide

How to Share Equity

By Nikki Piplani and Joe Wallin If you are a startup company founder, one of the first questions you will have will be about sharing equity with your early hires. Once you start asking, you will hear plenty of advice about this. You will hear— “Be generous”. You will also hear— “Worry about dilution”. The concerns … Continue reading How to Share Equity

Incentive Stock Options: The Qualifications and Limitations

In startup land, aside from cash compensation, stock options are the most important part of employee compensation. (This is the case because once a startup is beyond the very early, initial startup phase, no other form of equity compensation–such as restricted stock or RSUs–works very well from a tax point of view for employees.) Because … Continue reading Incentive Stock Options: The Qualifications and Limitations