As we've seen more scalable startups in the Wilmington area, we've received an increase in inquiries as to how to incentivize employees with equity ownership.
There are a couple of different ways this can be accomplished, and each approach has different tax treatments.
We'll cover some of the tools available, but the devil is in the details so we really recommend working closely with an experienced attorney that is collaborating with your CPA firm as part of this process.
With a lot of these, equity incentive approaches require a 409A valuation to take place, which can mean an additional cost of putting them in place.
If you are starting a company from scratch and you think there is a possibility you are going to offer equity to future employees or bring in external investors, we recommend you set up a corporation and not an LLC. The reason for this is a corporation can bring in additional owners by issuing additional shares. This will avoid triggering adverse tax consequences for the existing owners that would occur under an LLC structure.
There are a couple of different ways to offer equity-type ownership to employees. I've listed them in the order in which we most commonly see them.
Wilmington Announces New Planning Director
Staff Reports
-
May 20, 2022
|
|
WECT Names General Sales Manager
Staff Reports
-
May 20, 2022
|
|
What’s Next For Wilmington East’s $315M Windfall?
Johanna F. Still
-
May 20, 2022
|
|
Owners Taking Fermental To New Level
Lynda Van Kuren
-
May 20, 2022
|
|
Info Junkie: Aariene Hansley
Staff Reports
-
May 20, 2022
|
Fermental is one of Wilmington’s more unique watering holes – a bit quirky, but home to many loyal patrons who appreciate its laid-back atmo...
Offshore wind, which can generate electricity, represents an untapped economic frontier for the region that has bipartisan support....
A staple in the community for about three decades, the Wilmington custom woodworking shop also features a retail component – a unique featur...
The 2022 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.