Law Office of Tiffany Heah

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Corporate Tax

Found an Investor? Careful with the Tax Consequences

You have a great business idea and you need someone to provide capital and invest in your business idea in order to realize your vision. If you decide to provide the labor to develop the business in exchange for stocks in the company, those stocks would generally be treated as income and taxed at ordinary rate. If you are going to receive new investors in your ongoing business, you need to consider the value of the stocks or interest because the proceeds in excess of the fair market value of the stocks or interest would be taxable.

Before you accept the money and bring in a new partner, please consult a tax attorney on the best way to capitalize the business in order to create a tax efficient structure.