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UK founder in USA Start up, what are the tax implications for shares?

Given a 3 person start-up where the company will be registered in the USA, 2 founders in USA and 1 person in the start-up is a UK resident / citizen.

What considerations need to be made when the UK based founder will be receiving shares on a monthly vesting schedule in the USA based company?

Specifically, what are the UK and USA tax implications for the UK resident?

Answer 8901

I am not an accountant but I believe this to be true:

  1. Your Personal Tax:

The tax man is interested in money, not shares. If the tax man was interested in shares, the volatile markets would prove difficult for them to gauge if you owe tax or not. Thus tax becomes due only when you profit from the shares. If you get shares every month and do nothing with them, then nothing is due. When you do your yearly tax return I believe there is a section related to investments and it asks for an approximate value. Answer it honestly, but its only for their internal notes.

If you use the shares as security for a loan, then tax liability might change.

  1. Company Tax: The US Company might have to file that you are a shareholder. It depends if you are a Director or on the board. If you are not, then your shareholding gets bundled with other non-executives under “other shareholders”

Thoughts you might want to keep in mind: Are there restrictions on the shares? Are you prevented from transfering or selling them until after a specific date? Is there an agreed method on how they are valued? Are you restricted to sell them only back to the company or are you allowed to sell them to someone else (an investor for example). Make sure your work contract references juristiction for disputes - since it is a US company, I suspect US law, but many state laws. Best to be clear now to avoid the risk of worry later.

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