[kansface]

This sounds like very bad advice for tax consequences. Is an IOU tax deductible? Does one declare IOUs in an 83b election?

Beyond tax implications and VCs, the IOU system strikes me as particularly terrible advice. In what realm is it reasonable to simply ignore hard interpersonal problems until they go away? If some group of people can't quickly come to an equitable arrangement for the division of equity, they shouldn't form a business. After all, founder breakups are a leading cause of failure.

[tptacek]

No, one doesn't declare IOUs on an 83b election, because the 83b is about up-front valuation of equity, not about loans.

Different loans have different tax implications. If the "IOU" you're taking is a deferred salary arrangement, and you are eventually paid a year's salary as a lump sum, that will obviously be taxed as income. If you're paid back a loan you made to fund operational expenses, and the loan carried no interest, the tax implications are likely to be minimal.

In any case, if your equity is worth anything, you're working with an accountant. Actually: if there's money changing hands in any direction, you're working with an accountant.

An IOU doesn't "ignore hard interpersonal problems". It's one of several resolutions to those problems. Your last sentence can be true without IOUs being unreasonable.