Startups pose unique tax problems. One such problem focuses on the founder(s)--namely, the stock of a startup will (hopefully) appreciate in economic value rapidly, but much of a founder's wealth will be tied up in that stock. If the founder had to pay taxes on this appreciation, they would be forced to either sell the stock (into a very illiquid market, if a market exists at all) or somehow cobble together cash to meet potentially steep tax burdens. This article analyzes the Tax Code's answer to this problem--the Section 83(b) election.
- Summary by FizzLaw Team
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Startup Law 101 Series - What is an 83(b) election and how does it work in practice?