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I'm sort of at a loss of where to even begin with this one, so any help is much appreciated.

I'm in a late stage B2B sale with a company that's on the smaller side of publicly traded companies. I believe in this company quite a bit, and one thing that's been discussed is accepting stock for part of the total outlay of the contract. Discussion hasn't gotten too far, but I'm considering taking 50% in stock and 50% in cash. My company structure is a simple S-Corp with me as the sole employee. I've got an SEP IRA set up through Wells Fargo, to which I'm contributing (via the S-Corp) the max annually.

I'm just not sure how to even approach it and how it would work logistically.. some questions:

- Assuming it's even possible, how does the flow of the stock work? Assume that Client gives stock to S-Corp. How do I then transfer the stock to Employee (me)  - and further, how do I actually put that stock into my IRA? All I do is buy index funds monthly, I have no idea how to go about taking a stock grant and putting it into an IRA.

- How do I properly value the stock? Assume I'd just take the payment number and divide it by the current share price, and that's the number of shares I'd ask for? Do most companies value stock lower than cash? In other words should I ask for a slightly higher total value of stock than cash would be?

- Any weird tax issues?

Thanks in advance guys.

Edited by BradInATX

  • Author

Thanks. Definitely didn't consider that possibility. Where should I send the check?

 

I'm just trying to get a feel for if it's even a reasonably possible thing before i propose it to the prospect. I'd like to save paying an attorney for when there's some actual work to be done.

 

Sent from my SM-G930V using Tapatalk

 

 

 

 

If it's freely tradable stock then the valuation would probably be simply the trading price of the stock.  If they have to give you restricted stock it would be much different.

i think you could probably take the stock out of the S Corp as a distribution without any tax effect to you or the S Corp.

 

As mentioned, you need to consult a tax attorney or accountant to get a reliable answer. I like your deal though if you can live on the 50% cash. The stock is a complete gamble and up to you to decide your risk level. 

Getting a good accountant or tax advisor is probably your best bet.

However, a few things:

1.  What is the disposition of your relationship going forward with the purchaser?  In other words, are you retiring and moving on or will you continue to work for the purchaser going forward?

2.  You can't contribute stock into your SEP.  IRA contributions must be made in cash.  If the stock was in another qualified retirement account/program, you may be able to rollover this stock.

There may be some things you can do dependent to delay or minimize your tax burden dependent on the relationship you'll have with the purchaser going forward.  There may not be.  All depends.  Defer to an expert.

 

This whole idea doesn’t make sense to me. If it is a public company, the stock trades openly, so it can be exchanged for cash at any time.

There is only one reason the company would want to do it, to use shares held but not distributed. I would be very surprised that they would want to do that with you. They won’t.

Also, I can’t see any reason for you to want to do it. If you like the company go buy the stock with your fee you’ve earned.

  • Author

Thanks guys. Just trying to figure out if it's feasible and makes sense to do before i seriously pitch it as part of my proposal. I'd get a lawyer to draw everything up if it gets that far.

This whole idea doesn’t make sense to me. If it is a public company, the stock trades openly, so it can be exchanged for cash at any time.

 

There is only one reason the company would want to do it, to use shares held but not distributed. I would be very surprised that they would want to do that with you. They won’t.

 

Also, I can’t see any reason for you to want to do it. If you like the company go buy the stock with your fee you’ve earned.

Makes sense. My thought is that they might be willing to pay more in stock than in cash for budgetary/AOP reasons. My prospect is HR, and they typically have leftover shares in their employee incentive pool at EOY. So the VPHR mentioned they might could pull from that. I don't know how realistic it is from their side, but it's been discussed.

Getting a good accountant or tax advisor is probably your best bet.

However, a few things:

1.  What is the disposition of your relationship going forward with the purchaser?  In other words, are you retiring and moving on or will you continue to work for the purchaser going forward?

2.  You can't contribute stock into your SEP.  IRA contributions must be made in cash.  If the stock was in another qualified retirement account/program, you may be able to rollover this stock.

There may be some things you can do dependent to delay or minimize your tax burden dependent on the relationship you'll have with the purchaser going forward.  There may not be.  All depends.  Defer to an expert.

 

Thanks much. Relationship would be annual services agreement, renewed yearly if I do my job well. Though I'd probably not want ti take half in stock every year forward.

 

Sent from my SM-G930V using Tapatalk

 

 

 

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