Taxation of Stock Options: Senate Bill Update

Taxation of Stock Options As of now, the Senate has abandoned the idea of taxing stock options as they vest. This is the modification to the mark, released late yesterday. https://www.finance.senate.gov/imo/media/doc/11.14.17%20Chairman’s%20Modified%20Mark.pdfhttps://www.finance.senate.gov/imo/media/doc/11.14.17%20Chairman’s%20Modified%20Mark.pdf The modification strikes the proposal–Item III.H.1, Nonqualified deferred compensation–from the Chairman’s Mark.  A new discussion of Treatment of Qualified Equity Grants begins on p. … Continue reading Taxation of Stock Options: Senate Bill Update

Nonqualified Stock Options: Tax Withholding on Former Employees

It is well known that a company has to withhold income and employment taxes from an employee exercising nonqualified stock options. What About Former Employees? What is less well known is, what do you do if this person has left the employment of the company? What if they left employment years ago, and are not … Continue reading Nonqualified Stock Options: Tax Withholding on Former Employees

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

Incentive Stock Options: Post-Termination of Service Exercise Periods

The 90-day post termination of employment exercise period for stock options is under attack. A lot of companies are moving away from 90 days. You can find a list of them in a GitHub repo maintained by Zach Holman. Zach also has written an impassioned post about this issue. Why is the 90-day rule problematic? Because … Continue reading Incentive Stock Options: Post-Termination of Service Exercise Periods

Stock Options: Don’t Forget Board Approval

If you are in the process of awarding stock options to employees or service providers, do not forget that you need (among other things) board approval of all stock option grants. This is required by the corporate law of Delaware, Washington, and I imagine almost every state corporate law in the country. (In this post, I … Continue reading Stock Options: Don’t Forget Board Approval

Qualified Small Business Stock Options

Now that the qualified small business stock 100% tax exclusion is going to be permanent, one question that will come up more often is: Qualified Small Business Stock Options Do optionees qualify? Meaning, do holders of compensatory stock options, who exercise those options and acquire stock–can they qualify for the Section 1202 qualified small business stock … Continue reading Qualified Small Business Stock Options

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

Stock Option Taxation: The Senate’s Tax Bill

Stock option taxation is a sensitive issue in startup land. Fred Wilson recently sounded the alarm about the Senate’s proposal to tax stock options as they vest. TechCrunch has also written about this. Right now, what we have to work with is the DESCRIPTION OF THE CHAIRMAN’S MARK OF THE “TAX CUTS AND JOBS ACT”. The … Continue reading Stock Option Taxation: The Senate’s Tax Bill

Employee Stock Ownership: Empowering It Through A New Law

Broad-based employee stock ownership is one way to ensure that the wealth created in startups is widely shared by those who helped create the wealth. But broad-based stock ownership in private companies is thwarted by our tax code. Our tax code discourages the sharing of stock ownership among a company’s workers by taxing workers on … Continue reading Employee Stock Ownership: Empowering It Through A New Law

S Corporations & Blank Check Preferred Stock

By Jordan Taylor, CPA and Joe Wallin I have heard this a number of times: “A corporation cannot make an S election if it has preferred stock authorized in its charter, even if the preferred stock is ‘blank check,’ meaning it doesn’t have any rights, preferences and privileges ascribed to it, and none of it … Continue reading S Corporations & Blank Check Preferred Stock