Stock Purchase Rights and Founder’s Shares
A stock repurchase right with regard to a founder is a provision in a stock purchase agreement permitting the issuing corporation to repurchase certain of the founder’s shares should she leave the corporation before an agreed minimum period of time has elapsed. Venture investors tend to require that a corporation have such a repurchase right with founders as a condition to their investing. They do this generally to align the founder’s risk with their own.The Early Departing Founder Where there are..
Qualified Small Business Stock-what is it and why does it matter to Startup investors?
Investors in startups frequently require the corporation to warrant in connection with sale of its stock that the startup’s shares are qualified small business stock within the meaning of Section 1202 of the Internal Revenue Code (the Code). The reason is that Section 1202 allows a certain taxpayers to exclude from taxable income a portion of the gain realized on the sale of qualified small business stock. Section 1045 of the Code further allows certain taxpayers to defer recognition of potentially all su..
Can an LLC member receive a salary for services that is not treated as a distribution of profits?
Summary answer—Yes: an LLC may account for regular payments to a member for services and paid ahead of payments to members as distributions of profits as guaranteed payments, essentially a salary substitute. And like a salary, guaranteed payments are deductible by the LLC as business expenses, and represent regular income to the member recipient.
We have been asked on several occasions by businesses organizing as an LLC some variation of the following question:
If one or more of the members is paid a sal..