tax – Page 3 – High-Tech Law Blog

Joint Ventures 101

August 2, 2012 stanczyk Choice of Entity, Joint Ventures, LLCs, Tax

In many industries there are opportunities for individuals or companies to team up with one another to accomplish a mutually beneficial goal. This is most commonly accomplished by way of a joint venture.

A joint venture is somewhat amorphous as a concept as there are no bright line legal rules. It is a contractual arrangement, either through an outright joint venture agreement, an oral agreement, an LLC through its operating agreement or something similar. This post gives a broad overview of what it is and why it may be something that would work in your situation. We’ll look at it in more depth in future posts.

Pricing Stock Options – IRS Code 409A Treatment @ Paper this Deal

May 17, 2012 stanczyk Employees/Contractors, Securities, Shareholders Agreements, Stock, Stock Options, Tax

We’ve covered the bare basics of stock options on this blog before. Here we will look into something that is all important when issuing stock options – that is the option’s exercise price. The exercise price is the amount an option holder needs to pay in order to exercise the option to receive the share of underlying stock. Most option holders will not exercise their options until the price of the underlying stock has risen higher than the exercise price, so that they can receive the shares and then sell on the open market for a profit. The IRS got keen on the fact that a company could issue stock options with an artificially low exercise price, which would allow the option holder to immediately exercise the option to receive the shares with the greater value and sell those shares, which is in effect as if the company paid cash to the option recipient. Hence Section 409A voted into effect in the American Jobs Creation Act of 2004. The reason stock options can receive beneficial tax treatment is because they are treated as deferred compensation. To get that treatment, stock options should only be granted with exercise prices at or above the fair market value (“FMV”) of the underlying shares of stock on the date of the option grant.

Remember to make your 83 B elections! Here’s why and how to do it

May 2, 2012 stanczyk Employees/Contractors, Intellectual Property, Securities, Startup Formation, Stock, Tax

As I’ve written about in the past, founders of a startup should have their equity vested. There are times when you may not want to, but the majority of the time it is beneficial. Some investors may insist upon it, although its one of the things in the negotiations. If the founder’s stock is vested, they should make an 83-b election. To not do so could turn into a lot of tax due to the IRS over the years the stock will vest. We’ll discuss how it works and how to make the election here. Read more

Power Purchase Agreements a/k/a “PPAs”

February 6, 2012 stanczyk Investors, Renewable Energy

A power purchase agreement is an arrangment between usually two parties – the host and a services provider – whereby the host allows the provider to install a renewable energy system on its property and agrees to purchase the power generated by the system for a specific time frame, usually around 20 years. The host does not own the system. PPAs are used for solar and wind installations, with solar being the most prevalant by far. I have heard that geothermal transaction of this type was is in the works, if not done already. The power created by the system is used by the host, who has the right to sell any excess power created above and beyond the host’s needs to the local utility.

Granting LLC Profits Interests

January 31, 2012 stanczyk Employees/Contractors, LLCs, Stock Options

In a startup company, its common for certain employees to be compensated with some form of equity. When you incorporate, you would adopt a stock option plan and then issue options to the corporation’s employees to compensate them for their past services and to incentivize them to stay and keep up the hard work – make sure you vest!

With LLCs becoming ever more common, the owners of a startup organized as an LLC want to be able to compensate and motivate their employees and contractors in the same manner. They can do so by granting employees LLC profits interests.

Installing a Solar PV System – Credits/Incentives

January 3, 2012 stanczyk Renewable Energy, Tax

Obviously using renewable energy sources, such as solar, is a worthy sustainable practice. Although, installing solar panels may be worth it from a financial standpoint now. Really. If you have the up front money to cover the installation for your industrial, commercial, non-profit or residential use, you look to save a good deal of money over the next couple of years – generally an installation will “pay” for itself over a seven year timespan.