Reverse Vesting and S Corporations
I recently ran into this interesting question: If you want to use reverse vesting and take advantage of 83(b) in an S Corporation what do you do about (1) tax distributions and (2) built up after tax profits? In the case of tax distributions, once the shares are issued, the holder will have to pay tax (to the extent that there are taxable profits) pro rata in accordance with his ownership. So, it seems logical that any distributions made to help stockholders pay this tax should also go to the holder of restricted stock on a pro rata basis. If they do not,...
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Restricted Stock versus Options
One thing that I find many entrepreneurs (particularly first time entrepreneurs) struggle with is the distinction between options and restricted stock and why one would use restricted stock instead of options. See also the following link: Stock Options and Restricted Stock. I think it is fair to say that most, perhaps all, entrepreneurs have heard of options. But, just in case, options are contractual rights to purchase shares of stock (usually common stock) at a fixed price. In the employment context, options typically vest over time. For example, four year vesting is a common provision in a venture financed company. ...
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