The most founder-friendly way to purchase equity is to purchase it before the company has done anything meaningful, right after inception.
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If that co-founder did not have vesting written into their terms N years ago, and did not rigorously execute the repurchase, lawyer time.
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This is a problem which can be fixed but the fixes will require you to talk to an attorney and hear some very discomforting things.
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I always say "Social Network" at this point because it's going to be literally salient enough to be a subplot in the future movie about you.
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Did you know that you can bankrupt yourself by starting a successful company? It's fun and easy. All you have to do is forget 83(b) election
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The IRS treats founders with vesting as having earned their equity over the lifetime of their vesting period, rather than all upfront.
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Since it is earned for services rendered, one is obligated to pay tax, just like if the company compensates you with e.g. a chicken.
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The IRS is uninterested in receiving shares or chicken; it says "Value the property at fair market value, then pay us N% in US dollars."
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A founder can quite plausibly be earning (for tax purposes) ~$350k per month in illiquid shares by the end of their vesting period.
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If that founder did not remember to file a 83(b) election within 30 days of starting, the IRS will ask them for roughly half of $350k. Cash.
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Don't join your accountant's book of Cautionary Legal Tales We Tell To Scare Young Founders Into Filing Elections In A Timely Fashion.
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The situation for earning equity internationally gets complicated in a hurry, and you'll likely need advisors in every country implicated.
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I got some very bad news when selling my 2 software companies in Japan, due to doing the most straightforward thing w/r/t structure + sale.
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And while I don't begrudge the Japanese tax authorities their ~60% marginal rates on those transactions, I'd encourage you to get advice.
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On another note: software startups in particular are generally sticklers for making very, very sure that the company owns its IP.
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The body of practice has evolved towards gating equity ownership on successful execution of IP assignments to the company.
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Why? Because otherwise the people who create the IP (founders, engineers, writers, etc) default to owning it. Fast forward to a later date.
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When the company is sold, someone tells acquirer "Oh you can sure by that corporate entity but my intellectual property will cost you extra"
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This can cause acquirers, who have seen this movie before, to nope nope nope out of the deal.
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This is a problem which can be fixed but the fixes will require you to talk to an attorney and hear some very discomforting things.
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A recurring theme here: there is actually a reason for a lot of the boilerplate around How Companies Do Transactions.
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You have a budget for innovation and a budget for risk in your company. Allocate those budgets carefully.
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There are better places to spend founder brainsweat and spend risk than on the micromechanics of how your company does equity.
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The successful outcome for innovating on known-to-work equity structures is "Great we didn't bankrupt everyone and kill the company."
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It's generally a better idea to innovate on the product, marketing strategy, your approach to sales, hiring, etc you have lots of choices.
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End of conversation
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