An LLC can elect to be taxed as an S corporation, and for some LLCs this choice can result in significant tax savings. For others, doing may introduce unnecessary complexity without substantial benefits. This article discusses when to do so may make sense. LLC Tax Classifications A Limited Liability Company (LLC) has flexibility in choosing… Read more »
SAFEs, or Simple Agreements for Future Equity, are investment instruments sold by startups in early-stage fund raising. While related to equity, they are not considered traditional equity instruments at the time of their sale or issuance. Instead, a SAFE is a contract that gives the investor the right to convert the amount invested (the “Purchase… Read more »
Investors in startups frequently require the corporation to warrant in connection with the sale of its stock that the startup’s shares are qualified small business stock (QSBS) within the meaning of Section 1202 of the Internal Revenue Code (the Code). Section 1202 allows certain taxpayers to exclude from taxation up to 100% of gain realized… Read more »
A stock repurchase right with regard to a founder is a provision in the founder’s stock purchase agreement permitting the issuing corporation (or its assignee) to repurchase certain of the founder’s shares should they leave the corporation before an agreed minimum period of time has elapsed. Venture capital investors often require that the corporation have… Read more »
There are two major differences between incentive stock options (ISOs) and non-qualified stock options (NSOs): the type of person who may receive the option award and the tax consequences at the time of its exercise (buying the stock). There are other technical distinctions: ISOs come with a set of limiting requirements, whereas NSOs (like restricted… Read more »
Author: Andrew (Drew) Piunti DPA Law PC drew@dpalawyers.com Founders of early stage companies often find the matter of making an 83(b) election filing under the IRS Code perplexing. The question comes into play at the time shares are acquired subject to vesting. Timely filing can protect a founder from significant tax consequences down the line…. Read more »
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