Legal Question in Business Law in Michigan
Tax Law
I work for a small (6 person) software company. The first 3 employees, of which I am one, were promised 10% ownership of the company if we stayed through some very tough times a few years back. My boss is now following through on the promise and was instructed to value the company and then give private shares to each of us equaling 10%. This will supposedly make things easy, if the company was ever sold, for us to get our 10% share.
We are now being told we will be responsible for paying taxes on this amount of money the company is being valued at.
Do we really have to pay taxes on this? Is there another way to accomplish the 10% ownership that would get around this? None of us can really afford to pay taxes on, lets say $50,000 when we didn't receive any actual money.
1 Answer from Attorneys
Re: Tax Law
The stock shares are considered income and therefore you must pay tax on these shares.
Patrick Tracy
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