Baker Tax Blog

Updated. Originally posted September 14, 2019. Once there was a beautiful tech incubator named Y Combinator. In a dream one night she saw herself curing every start-up’s funding woes with a magical new creature called a SAFE. When she woke up, she got to work creating...

So, your company is being sold and you want to know whether you should exercise your stock options prior to closing.  First you should confirm whether the transaction agreement (i.e., stock purchase agreement, asset purchase agreement, or merger agreement) provides...

For tax purposes, there are three types of equity that can be issued in a partnership or an LLC taxed as a partnership: capital interests, profits interests, and carried interests. Knowing what type of interest you own or are being granted is important, because there...

 So, you started a business and you issued a convertible note. You know, a loan that can be repaid with the equity of your start-up. The date of the note conversion has arrived and you’re busy calculating how many shares you need to issue when suddenly you get an...

A parachute payment, in plain English, is a payment made to an executive when a company is sold, to help him or her land softly. A parachute payment, in tax speak, is more complicated. But here’s the gist: In the 1980’s Congress reacted to the public’s perennial...

I occasionally get asked whether it is possible to transfer a stock option. Listed below are relevant considerations.  Does the plan allow for it?  Carefully read the stock option plan and agreement to see if there are any restrictions on option transfer. There...

“You filed your Section 83(b) election, right?” Silence. “Right?” I gave a presentation a few years ago on how to fix a missed tax code Section 83(b) election. My phone started ringing the moment I returned to my office. Turns out, these get missed. Apparently,...

What do you do, when you receive a 409A valuation for your company that is lower than the exercise price of previously granted stock options? A few years ago I read an article titled, We Spend Too Much Time Celebrating "Start Ups" and Not Enough Time Celebrating "Keep...

So, you’d like to convert your limited liability company, which is taxed as a partnership, into a C corporation? This is generally not hard to do from a pure mechanics perspective.  If your LLC is organized in Delaware, or certain other states, the conversion can be...

Flashback to 2013. You were so excited when you started your company. You handed out stock options right away to your new employees and shared your expectation that the company would sell in a few years for a big pile of cash. Now it's 2023 however, and you're still...

Every year I get a new hard copy set of income tax regulations. These come in four phone book-size volumes. I probably look forward to getting these more than I should—they come at the end of December, and for a tax guy like me it always feels like a belated Christmas...

The following method for providing founders liquidity has been very popular during the last three years: An investor buys common stock from founders during a preferred financing at the preferred price. Those same common shares are then magically exchanged by the...