Should I Send Out Investor Updates? While generally not required, it is a good idea to send out regular investor updates (at least quarterly) to establish relationships with your investors, keep them informed, and potentially get ahead of any bad news that may arise. After you’ve established…
Now that you have a VC-backed board, good corporate governance and a well-functioning board are even more necessary than when your board was made up solely of founders. Oversight and Supervision The board is collectively responsible for promoting the success of the company by directing and supervising…
Now that you’re a VC-backed company, chances are you’re about to go hire a bunch of employees with those funds. Your investors are looking to you and your board to comply with the law and protect their investment from employee-related risks. There are numerous federal and state…
We’re excited to introduce a multipart and ongoing series about the basics of (and some advanced topics related to) equity for startup employees and contractors. The “Human Capital” aspect of any enterprise, especially a technology company, is its most valuable asset, and we hope to highlight the…
Stock options are the most common form of equity incentive for early-stage startups. A stock option grants the option holder the right to purchase a specific number of shares of the company within a fixed period of time at a preset “exercise” price, generally following the satisfaction…
The U.S. federal taxation of stock options for U.S. taxpayers depends on whether the options are classified as incentive stock options (ISOs) or nonstatutory stock options (NSOs). Incentive Stock Options (ISOs) ISOs may provide a tax advantage to the holder if (i) the optionee does not sell…
A stock purchase award (also known simply as “restricted stock”) is the sale of a share of stock in exchange for an actual cash payment (or transfer of property with a fair market value that equals the purchase price and which property is not already the company’s).…
A stock bonus is the issuance of a share of stock without payment of any purchase price. The stock bonus can be granted subject to vesting or can be granted fully vested, such as in satisfaction of prior services rendered or as an alternative form of payment…
Restricted stock units (RSUs) are rights to acquire stock without paying an exercise or purchase price. Vesting and settlement must comply with Internal Revenue Code Section 409A. Generally, shares must be issued (and taxation triggered) shortly after the vesting date. While private companies commonly use a liquidity…
We often are asked when a company would use “full value” stock awards (stock purchase, stock bonus, or RSUs) rather than stock options. There are a few scenarios in which stock awards might be a more beneficial method of equity incentive than stock options: Very early-stage company…
