Creative compensation where art thou; What do I do with my 401(k); and will the print/news media keep the New Economy humming.
1. The Stock Option is worthless, the employees are restless.
The Washington Post suggests that Dot-Com employees are restless.
The answer, give them cash upfront without having it called compensation. How about financial planning, housing, meals, computers, and other things that could be non taxable compensation. What about education benefits, childcare, medical, dental, commuter expenses?
By the way, are qualified stock options the best way to go? We do not think so with the Alternative Minimum Tax that comes due upon exercise, and no cash to pay the taxman. Has anyone heard of Restrictive Stock Plans and the IRC Section 83(b) election, with no Alternative Minimum Tax?
2. What to do with 401(k) accounts when you change jobs?
How about setting up your own C Corp. and establish a corporate retirement plan, and then borrow out the plan assets to start your own home-based business. Additional contributions to the plan are then made and additional loans are taken out. How is that for startup capital. The alternative, pay the taxman, penalties and all.
3. Will the New Economy support another magazine? Yes says Time Warner/AOL.
The flashy E-Company is on your Newstands and their web site is up and running. Meanwhile The Industry Standard is sending out e- mails all over the place daily. Where is their discussion of the simple facts of life, that the only thing sure in life is death and taxes. If the startups of new are like the startups of old then good tax planning is the best place to start.
Suppose you have a great business plan, and the VCs are knocking down your door, and offer $5M for 10% of the action, what is the remaining 90% worth? Is it taxable to you when NEWCO, Inc. is formed? What if it is just $500,000?
Today's New York Times has a great cover on their Arts and Leisure page one by the American Artist Al Hirschfeld [95 and still going strong] who works in his home-based business in a New York Brownstone, as many others do. Who owns these Multimillion Dollar brownstones? The artists' corporations of course, with their kids and others owning part of the corporation, for tax purposes, we assume.
To see his work check it out on line not bad for someone 95 and going on 60.
Jim Schneider, LL.M.
The Taxman86 Speaks... is copyright 1998-2010 by James E. Schneider, LL.M. Inc.