In the Start-Up Entrepreneur Series, I will be taking a deeper look into some of the most common questions early stage founders face in putting together and operating their new businesses.
Two weeks ago, we discussed considerations associated with the issuance of Company stock to Founders. One of these considerations was the concept of “vesting”. To quote this very blog:
“Vesting” is a fancy legal term for a number of separate, but interrelated concepts related to giving back stock if a purchaser (or grantee) either leaves a relationship with the company (time-based vesting) or doesn’t do what they said they were going to do (milestone-based vesting).
In short, while a Founder receives stock (or “units of interest” in a limited liability company), the Founder is not secure in his or her ownership of that stock until it is “vested”. Prior to that point, such stock may be forfeited (or repurchased at below market cost) by the Company.
Which raises the age-old question: What about taxes?