A sophisticated employee would object to this because they can’t get

Apr 23, 2024
4:26:36pm

Pasadena All-American

Long term cap gains that they could if you issued profits interest units in an LLC without the s corp election. They will be paying ordinary income on the bonus.

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Pasadena

Bio page: Pasadena
Joined: Aug 21, 2007
Last login: May 2, 2024
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Messages

Author

Time

New Business Equity Question

SpecialT This Board Rating Has Been Fla

Apr 23, 3:42pm

The risk of a new start-up impacts everyone. Founders take a major financial risk. Employees take a big career risk if

Division Bell

Apr 23, 3:49pm

Depends on the company type. Is this service or software? Lifestyle or VC track?

insanobueno

Apr 23, 3:57pm

Also type of employee and risk/upside involved

insanobueno

Apr 23, 3:59pm

Not critical. Easily replaced IMO.

SpecialT

Apr 23, 4:00pm

Not VC track. It's a health/weightloss/telemed company. Unlikely to ever go through a transaction.

SpecialT

Apr 23, 4:00pm

I favor employee agreements

2FarGone

Apr 23, 4:07pm

The s election limits the type of equity you can

Pasadena

Apr 23, 4:22pm

A sophisticated employee would object to this because they can’t get

Pasadena

Apr 23, 4:26pm

What would your advice be if the company was expecting significant sales, and the employees were all founders?

Division Bell

Apr 23, 4:54pm

Sounds like management/owners should be aligned then since mgt are founders.

Pasadena

Apr 24, 12:13pm

But this would only pay off if there is a transaction in the future which he

sandtrapcougar

Apr 23, 5:03pm

Yeah, I couldn't tell if he was saying a sale is not likely in the future or

Pasadena

Apr 24, 12:17pm

Sounds like a profit sharing plan instead of Equity would be a better setup in

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