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Offering Equity & Tax Consequence

    • 1 posts
    May 14, 2012 1:31 PM EDT

    Hi,

    Currently I own 100% of my company. We're a pre-revenue company. So far I received a small investment of $15K, in the form of convertible debt.

    Recently I decided I wanted to give some equity in my company to a former co-worker (he will not be a full-time employee), who will add tremendous value to the company. He has helped me out for over a year and I have paid him for the work he's done. But we're both at the point where it makes sense for him to officially come on board. He will bring us to revenue 8-10 months faster than without him. So we came up with a milestone-based equity formula, where he will get incremental equity increases per each milestone he completes.

    Having said that, let's say I value the company at 100K and I give him 3% equity when the agreement is signed. Will he be liable for taxes on $3K in 2012? Is there any way to offer him founder's equity so he won't be taxed or is it too late for that?

    Thank you.