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Ask HN: Time between founder stock and priced round – tax implication?

8 pointsby ggonwebover 9 years ago
How long should a company wait between incorporating (issuing founders stock) & taking in a priced equity round from investors? I recently incorporated and issued myself founders stock at a par value of $0.0001/share. I now have investors who want to make an equity investment of $500,000 for 25% of the company. I was told that I need to wait a period of time between from when I issued the founders stock and when I take in a priced equity round, so that I do not have to pay taxes on the founders shares that I received. How long does the IRS need that time period to be? 2 days? 2 weeks? 2 months? My investors may be able to wait, but I also recognize that the market may dramatically change in a short period of time, since I am in the tech industry. I've been told that it's better to take a check immediately, and I would image Ycombinator startups commonly have to incorporate and then immediately take in their funding check.

3 comments

TaylorSwiftover 9 years ago
Per 83(b):<p>In order for an 83(b) election to be effective, the individual must file the election with the IRS prior to the date of the stock purchase or within 30 days after the purchase date. There are no exceptions to this timely filing rule.<p><a href="http:&#x2F;&#x2F;www.startupcompanylawyer.com&#x2F;2008&#x2F;02&#x2F;15&#x2F;what-is-an-83b-election&#x2F;" rel="nofollow">http:&#x2F;&#x2F;www.startupcompanylawyer.com&#x2F;2008&#x2F;02&#x2F;15&#x2F;what-is-an-83...</a>
jatollyaover 9 years ago
Did you file an 83(b) when your stock was issued and purchased? <a href="https:&#x2F;&#x2F;www.cooleygo.com&#x2F;what-is-a-section-83b-election&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.cooleygo.com&#x2F;what-is-a-section-83b-election&#x2F;</a> Is there a vesting schedule?
joshuover 9 years ago
You need better lawyer.