Select Page

 Baker Tax Blog

Form 1099-NEC and Legal Services

Form 1099-NEC and Legal Services

It's 1099 season. For those of you who paid a law firm for legal services this year, here are three tips: 1. Payment for legal services goes in box 1 of Form 1099-NEC. Do not use Form 1099-MISC. Form 1099-MISC box 10 "Gross proceeds paid to any attorney" is for when...

Liquidating after an Asset Sale

Liquidating after an Asset Sale

Let's say you're the majority shareholder of ABC, Inc., a C corporation, which just sold substantially all of its assets in a taxable asset sale.  The deal consideration consists of three parts (i) $30M to be paid at closing, (ii) $3M which is being held back in an...

SAFEs in LLCs

SAFEs in LLCs

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...

Exercising Shortly Before Closing

Exercising Shortly Before Closing

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...

Partnership Equity

Partnership Equity

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...

Convertible Notes

Convertible Notes

 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...

How to Run Back of the Envelope Parachute Payment (280G) Calculations

How to Run Back of the Envelope Parachute Payment (280G) Calculations

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...

Transferring a Stock Option

Transferring a Stock Option

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...

Fixing a Missed 83(b) Election

Fixing a Missed 83(b) Election

“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,...

Stock Option Downward Repricings

Stock Option Downward Repricings

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...

LLC Conversions

LLC Conversions

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...

Option Expiration Alternatives

Option Expiration Alternatives

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...