Ask HN: Joined a startup? Your taxes are about to get complicated. Questions?

Post by jawmes8 » Wed, Apr 19, 2023, 12:26 AM UTC

brntsllvn wrote: post #9

jawmes8 wrote: post #8

Earlier quoted context omitted.

Can an S corp be single member? What are the drawbacks to using an S corp as opposed to an LLC?

S Corp is just a tax filing status. Your legal entity remains an LLC. The benefit of S Corp tax status is that you pay yourself a dividend in addition to your income. They are taxed differently. The drawback is you now have a payroll obligation. An LLC can be single member. An LLC with S Corp tax status cam also be single member. There's a lot of info about S Corp status online. Hopefully this puts the strategy on yo…

Post by brntsllvn » Wed, Apr 19, 2023, 3:24 AM UTC

yellow_lead wrote: post #12

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.

Post by yuiotyu » Wed, Apr 19, 2023, 12:54 PM UTC

brntsllvn wrote: post #6

momofuku wrote: post #4

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:

When you're compensated in private shares, you still owe tax on them. With public companies you typically "sell to cover" when you vest, but this isn't possible with private shares. The workaround is the 83(B) election.