Search results for: stock options

By Dennis Kasimov and Joe Wallin In the early days of a startup, it is common for founders to not pay themselves any cash compensation. This approach is sometimes also applied to other service providers, who receive just stock option compensation. Despite the prevalence of this practice in the early days, as things progress itContinue reading “Startup Compensation: Founders, Don’t Forget to Pay Yourselves (and Others)”

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 theContinue reading “ISOs: Annual Tax Reporting Requirement”

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 needed to exercise and file anContinue reading “Immediately Exercisable ISOs: The Problems”

If you are administering a private company stock option plan, you need to do what is referred to as “the Rule 701 math” before every grant of stock options or equity awards. What is “the Rule 701 math”? Rule 701 contains a set of mathematical limitations on how many shares of stock you can offer service providersContinue reading “Rule 701 Math: The 15% of Shares Test”

I have heard this a number of times in regards to S Corporations & Blank Check Preferred Stock: “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, andContinue reading “S Corporations & Blank Check Preferred Stock”