Be Careful Who You Issue Stock Options To Under Rule 701

Intro to Rule 701 Any time a company grants stock options or compensatory equity awards of any kind, the company must comply with the registration requirements of federal and applicable state securities laws or find an applicable exemption from the registration requirements. If you are a startup, the securities law exemption you will probably relyContinue reading “Be Careful Who You Issue Stock Options To Under Rule 701”

Amendments to Washington’s Equal Pay and Opportunity Act

by Lucinda J. Luke 12/28/22 Amendments to Washington’s Equal Pay and Opportunity Act (EPOA) go into effect January 1, 2023 (with no grace period) and require most employers who engage in business in Washington state to include pay ranges and benefits information in their job postings. The Washington Department of Labor and Industries has recentlyContinue reading “Amendments to Washington’s Equal Pay and Opportunity Act”

Profits Interests in a Limited Liability Company – What Are They?

A common question we receive when working with limited liability companies taxed as partnerships under Subchapter K of the federal income tax law (“LLCs”) is, can the company grant stock options to its employees and independent contractors, even though the company isn’t a state law corporation (and is in fact taxed as a partnership underContinue reading “Profits Interests in a Limited Liability Company – What Are They?”

Repricing Stock Options: The Rule 701 Math

By: James Graves and Joe Wallin There may be times during the life of your company in which you will want to reprice underwater stock options. Depending on your cap table, however, this may not be as easy as you think. As you know, Rule 701 sets forth mathematical limitations you must follow when issuingContinue reading “Repricing Stock Options: The Rule 701 Math”

Public Policy: Remove Taxes on Sharing Stock With Workers

Our federal tax system, the public policy, makes it unnecessarily difficult for private companies to share stock with their employees, contractors, advisors, and other service providers. The problem lies in our tax law. The Problem with Issuing Shares to Workers Why doesn’t your employer bonus your shares? Because the IRS treats any share bonus asContinue reading “Public Policy: Remove Taxes on Sharing Stock With Workers”

The Rule 701 Math: How to do it

If you are a non-public company granting stock options or other compensatory equity awards, you need to be familiar with Rule 701 Math and in particular its mathematical limitations. Fortunately, they are pretty simple. Unfortunately, many entrepreneurs overlook them with sometimes disastrous consequences. To save you some time, we wrote you a step-by-step guide toContinue reading “The Rule 701 Math: How to do it”

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”

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”. TheContinue reading “Stock Option Taxation: The Senate’s Tax Bill”

How To Avoid Millions of Dollars In Capital Gains Tax By Using The Qualified Small Business Stock Exclusion

Most entrepreneurs don’t know of a simple way to avoid millions of dollars in capital gains tax. Section 1202 of the Internal Revenue Code grants non-corporate taxpayers a tax break of up to $10,000,000 in capital gains on “qualified small business stock” that the taxpayer holds for more than five years. This is a hugeContinue reading “How To Avoid Millions of Dollars In Capital Gains Tax By Using The Qualified Small Business Stock Exclusion”