Is there any way a pre-IPO startup can give equity without imposing a tax burden on employees?
For instance, if an employees options vest, I believe they are required to pay taxes on the computed value of the shares. But in i.e a pre-seed company, there may be further dilution, so you end up paying tax on something that is lost in the end.
Biz tax is a deep topic. Short answer is the LLCs are passthrough, which means you'll receive a k-1 from your accountant that you include in your personal return.
Quick strategy tip: have your accountant apply for S corp status for your LLC. You'll pay less tax right away.
Note in CA, there are additional reporting requirements. This is not tax advice, but I believe passthrough single-member LLCs (including no-income) must file Form 568 by March 15 and pay a mandatory $800 annual fee by April 15. (Other types/taxation methods could have slightly different requirements.)
Actually, I'll be joining a startup-ish in about 1.5 months. I am an immigrant and this will be my first job out of school. What do you mean taxes are about to get complicated :eyes:
I'm assuming you are US-based. If you receive compensation in stock, no matter the currency denominator, it is income and is therefore subject to income tax.
Your employer should produce a W-2, and your share grant will be included.
For instance, if an employees options vest, I believe they are required to pay taxes on the computed value of the shares. But in i.e a pre-seed company, there may be further dilution, so you end up paying tax on something that is lost in the end.