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Re:Ask HN: Equity for first hire? by onlawschool on Wednesday October 12, 2011 @12:30AM (#3101510)
Finally, I'd also like to note that, given the proximity of this hire to your series A funding, you may want to consider the tax implications involved in granting an equity stake to an employee.

If the company is valued at $30 million, then granting a new hire 10% of the stock in the company might be viewed as a taxable event by the IRS. In that case, your employee might find himself responsible for paying taxes on $3 million in income. You don't want to wind up with an employee who owes $750,000 to the IRS and can't pay it.

Consulting with a qualified attorney will be invaluable in structuring this transaction in order to avoid this sort of problem. With a valuation of $25-$30 million, you really must seek legal counsel in this matter before moving forward. With that much money on the line, you really can't afford NOT to have a good attorney on your side when you are putting together this deal.

Note: I am not a licensed attorney and this is not legal advice. Please seek the advice of qualified legal counsel.

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