Proper financial planning must be implemented immediately in order to ensure that both FASB (Financial Accounting Standards Board) standards and all applicable IRS tax codes are satisfied in determining the" fair value" of the equity security or option granted.

Trying to determine fair value leads many companies to engage an appraiser to perform a valuation of the company.  These valuations involve intense calculations and considerations, which prove to be expensive.  The consequences of being out of compliance include having to pay additional corporate income taxes, interest, and penalties from the IRS, as well as the financial statements potentially not being in compliance with generally accepted accounting principles. 

Several different types of stock grants exist that may be used to compensate employees of an early stage company. These include stock grants, stock options, restricted stock grants, warrants, and convertible debt, each of which offers different advantages to the lender and the target employee.

If you or your company needs a trusted business advisor with the knowledge and skills to assist with selecting and structuring the necessary stock compensation tools for your company to succeed, we would be delighted to help. If you have any questions, please feel free to contact Ardi Setiadi, Financial Services Manager, or Sarah Hancock, Tax Services Director, at 972-644-7112. We look forward to hearing from you!