Carta Collective

Hello, Carta Community and equity friends alike! My name is Chris and I am the founder of Equity Admin Co. We are a firm that specializes in Equity Administration for companies who use Carta. We provide standard equity administration and cap table updates - issuances, transfers, modifications, etc. - financial reporting (ASC 718) help, and anything else equity related that is done on or off Carta's platform.

It was in 2018, when I started working at Carta, that I discovered I could have a career in equity. I had previously been in college for 7 years and could never find a degree or topic that I was passionate about. When I started at Carta and discovered this new world, I walked away from school without hesitation - I had found my passion!

In 2019, a new role at Carta opened up as a Stock Plan Administrator. We offered an additional service to take the actual management of the cap table out of the hands of the company executives and their attorneys, and it was a huge hit among Carta customers. A few months later I left on paternity leave with my first son, and while I was out, my boss decided to leave Carta…I came back a month later and they told me they were no longer going to offer our service, but that I could keep working with my current clients until their contracts were up. For the next year, I continued my work and also worked a different position at Carta, but I missed actually managing cap tables full-time. In August 2020 I talked to Carta about starting my own firm that specialized in their platform, and they were more than supportive.

I was able to take my business full-time in March 2021 and we now have a team of 7 additional consultants (almost all ex-Carta) who help manage company cap tables and equity data. We have 40+ current clients that range from newly-incorporated startups to massive decacorns. The total valuation of our clients is above $90 billion, and we're blessed to work with some of the most amazing founders and companies on the planet.

I want to share some cap table and equity tips for founders:

1. Make sure your cap table is up-to-date from the incorporation of your company. The sooner you ensure accuracy (and maintain it), the less money you'll spend later trying to go back through years of documents to make sure it's right - and the less headache you'll have during an audit or due diligence in the future.
2. Assign one person to manage your cap table (whether that's internal or external), and make sure they have bandwidth to handle it and make sure it's up-to-date. Your equity is simple to manage when you first begin, but if you scale quickly, it can be difficult to keep up with it when you don't have someone dedicated to it.
3. When offering equity to your employees, be open and transparent with them regarding what type of equity they are receiving, how much they are receiving, and what it's currently worth (FMV & preferred price, if applicable). The more answers you can offer up front, the less you'll have to worry about your employees being distrusting or disheartened later, because they feel like you were dishonest early on.

Now is the time - Ask me anything!

Hello, Carta Community and equity friends alike! My name is Chris and I am the founder of Equity Admin Co. We are a firm that specializes in Equity Administration for companies who use Carta. We provide standard equity administration and cap table updates - issuances, transfers, modifications, etc. - financial reporting (ASC 718) help, and anything else equity related that is done on or off Carta's platform.

It was in 2018, when I started working at Carta, that I discovered I could have a career in equity. I had previously been in college for 7 years and could never find a degree or topic that I was passionate about. When I started at Carta and discovered this new world, I walked away from school without hesitation - I had found my passion!

In 2019, a new role at Carta opened up as a Stock Plan Administrator. We offered an additional service to take the actual management of the cap table out of the hands of the company executives and their attorneys, and it was a huge hit among Carta customers. A few months later I left on paternity leave with my first son, and while I was out, my boss decided to leave Carta…I came back a month later and they told me they were no longer going to offer our service, but that I could keep working with my current clients until their contracts were up. For the next year, I continued my work and also worked a different position at Carta, but I missed actually managing cap tables full-time. In August 2020 I talked to Carta about starting my own firm that specialized in their platform, and they were more than supportive.

I was able to take my business full-time in March 2021 and we now have a team of 7 additional consultants (almost all ex-Carta) who help manage company cap tables and equity data. We have 40+ current clients that range from newly-incorporated startups to massive decacorns. The total valuation of our clients is above $90 billion, and we're blessed to work with some of the most amazing founders and companies on the planet.

I want to share some cap table and equity tips for founders:

1. Make sure your cap table is up-to-date from the incorporation of your company. The sooner you ensure accuracy (and maintain it), the less money you'll spend later trying to go back through years of documents to make sure it's right - and the less headache you'll have during an audit or due diligence in the future.
2. Assign one person to manage your cap table (whether that's internal or external), and make sure they have bandwidth to handle it and make sure it's up-to-date. Your equity is simple to manage when you first begin, but if you scale quickly, it can be difficult to keep up with it when you don't have someone dedicated to it.
3. When offering equity to your employees, be open and transparent with them regarding what type of equity they are receiving, how much they are receiving, and what it's currently worth (FMV & preferred price, if applicable). The more answers you can offer up front, the less you'll have to worry about your employees being distrusting or disheartened later, because they feel like you were dishonest early on.

Now is the time - Ask me anything!

I guess I'll go first! Have you seen any unique or interesting vesting requirements? Any in terms of time or performance that stand out from the norm? 

Hello, Carta Community and equity friends alike! My name is Chris and I am the founder of Equity Admin Co. We are a firm that specializes in Equity Administration for companies who use Carta. We provide standard equity administration and cap table updates - issuances, transfers, modifications, etc. - financial reporting (ASC 718) help, and anything else equity related that is done on or off Carta's platform.

It was in 2018, when I started working at Carta, that I discovered I could have a career in equity. I had previously been in college for 7 years and could never find a degree or topic that I was passionate about. When I started at Carta and discovered this new world, I walked away from school without hesitation - I had found my passion!

In 2019, a new role at Carta opened up as a Stock Plan Administrator. We offered an additional service to take the actual management of the cap table out of the hands of the company executives and their attorneys, and it was a huge hit among Carta customers. A few months later I left on paternity leave with my first son, and while I was out, my boss decided to leave Carta…I came back a month later and they told me they were no longer going to offer our service, but that I could keep working with my current clients until their contracts were up. For the next year, I continued my work and also worked a different position at Carta, but I missed actually managing cap tables full-time. In August 2020 I talked to Carta about starting my own firm that specialized in their platform, and they were more than supportive.

I was able to take my business full-time in March 2021 and we now have a team of 7 additional consultants (almost all ex-Carta) who help manage company cap tables and equity data. We have 40+ current clients that range from newly-incorporated startups to massive decacorns. The total valuation of our clients is above $90 billion, and we're blessed to work with some of the most amazing founders and companies on the planet.

I want to share some cap table and equity tips for founders:

1. Make sure your cap table is up-to-date from the incorporation of your company. The sooner you ensure accuracy (and maintain it), the less money you'll spend later trying to go back through years of documents to make sure it's right - and the less headache you'll have during an audit or due diligence in the future.
2. Assign one person to manage your cap table (whether that's internal or external), and make sure they have bandwidth to handle it and make sure it's up-to-date. Your equity is simple to manage when you first begin, but if you scale quickly, it can be difficult to keep up with it when you don't have someone dedicated to it.
3. When offering equity to your employees, be open and transparent with them regarding what type of equity they are receiving, how much they are receiving, and what it's currently worth (FMV & preferred price, if applicable). The more answers you can offer up front, the less you'll have to worry about your employees being distrusting or disheartened later, because they feel like you were dishonest early on.

Now is the time - Ask me anything!

Hey @Carlos Guzman! Great to hear from you. About 90% of the vesting schedules I see for option grants are 1/48 monthly, 1 year cliff, and the majority of RSU vesting schedules I see are 1/12 quarterly with a one year cliff (some companies will also do bi-annually or annual vesting on their RSUs if they are single-trigger, because it's easier to manage and more cost effective for the company).

But here are a few unique vesting schedules I've seen recently:

• X number of shares vest per hour worked by the consultant or advisor (so the stakeholder simply works hours until they've vested all their options)
• 1/4 vests as soon as the department that the stakeholder is in hits $10M in recurring revenue, then the second 1/4 will vest 12 months following that date (this can be good motivation for a new product line that's released and the company wants to give their employees extra incentive to grow the new product line)
• Vesting is dependent on stakeholder's ability to introduce investors to the company who will invest at least $5M into company's seed round
• Vesting is dependent on stakeholder's ability to help the company expand their product line into [insert Asian country here]

Vesting is cool because it's incredibly flexible, and performance and milestone-based vesting are awesome ways to incentivize people to get stuff done; however, these types of complicated or event/performance-dependent vesting schedules are very difficult to expense when it comes to Stock Comp Expense. Carta and other softwares can't really handle these types of awards and simply exclude them from the stock comp calculation, because no one can tell if/when the milestone will be achieved. So I'd keep that in mind if you're thinking about adding some funky vesting to an equity award.

I guess I'll go first! Have you seen any unique or interesting vesting requirements? Any in terms of time or performance that stand out from the norm? 

Hello, Carta Community and equity friends alike! My name is Chris and I am the founder of Equity Admin Co. We are a firm that specializes in Equity Administration for companies who use Carta. We provide standard equity administration and cap table updates - issuances, transfers, modifications, etc. - financial reporting (ASC 718) help, and anything else equity related that is done on or off Carta's platform.

It was in 2018, when I started working at Carta, that I discovered I could have a career in equity. I had previously been in college for 7 years and could never find a degree or topic that I was passionate about. When I started at Carta and discovered this new world, I walked away from school without hesitation - I had found my passion!

In 2019, a new role at Carta opened up as a Stock Plan Administrator. We offered an additional service to take the actual management of the cap table out of the hands of the company executives and their attorneys, and it was a huge hit among Carta customers. A few months later I left on paternity leave with my first son, and while I was out, my boss decided to leave Carta…I came back a month later and they told me they were no longer going to offer our service, but that I could keep working with my current clients until their contracts were up. For the next year, I continued my work and also worked a different position at Carta, but I missed actually managing cap tables full-time. In August 2020 I talked to Carta about starting my own firm that specialized in their platform, and they were more than supportive.

I was able to take my business full-time in March 2021 and we now have a team of 7 additional consultants (almost all ex-Carta) who help manage company cap tables and equity data. We have 40+ current clients that range from newly-incorporated startups to massive decacorns. The total valuation of our clients is above $90 billion, and we're blessed to work with some of the most amazing founders and companies on the planet.

I want to share some cap table and equity tips for founders:

1. Make sure your cap table is up-to-date from the incorporation of your company. The sooner you ensure accuracy (and maintain it), the less money you'll spend later trying to go back through years of documents to make sure it's right - and the less headache you'll have during an audit or due diligence in the future.
2. Assign one person to manage your cap table (whether that's internal or external), and make sure they have bandwidth to handle it and make sure it's up-to-date. Your equity is simple to manage when you first begin, but if you scale quickly, it can be difficult to keep up with it when you don't have someone dedicated to it.
3. When offering equity to your employees, be open and transparent with them regarding what type of equity they are receiving, how much they are receiving, and what it's currently worth (FMV & preferred price, if applicable). The more answers you can offer up front, the less you'll have to worry about your employees being distrusting or disheartened later, because they feel like you were dishonest early on.

Now is the time - Ask me anything!

Very interesting to hear what others are doing. Thanks for the reply.

Hey @Carlos Guzman! Great to hear from you. About 90% of the vesting schedules I see for option grants are 1/48 monthly, 1 year cliff, and the majority of RSU vesting schedules I see are 1/12 quarterly with a one year cliff (some companies will also do bi-annually or annual vesting on their RSUs if they are single-trigger, because it's easier to manage and more cost effective for the company).

But here are a few unique vesting schedules I've seen recently:

• X number of shares vest per hour worked by the consultant or advisor (so the stakeholder simply works hours until they've vested all their options)
• 1/4 vests as soon as the department that the stakeholder is in hits $10M in recurring revenue, then the second 1/4 will vest 12 months following that date (this can be good motivation for a new product line that's released and the company wants to give their employees extra incentive to grow the new product line)
• Vesting is dependent on stakeholder's ability to introduce investors to the company who will invest at least $5M into company's seed round
• Vesting is dependent on stakeholder's ability to help the company expand their product line into [insert Asian country here]

Vesting is cool because it's incredibly flexible, and performance and milestone-based vesting are awesome ways to incentivize people to get stuff done; however, these types of complicated or event/performance-dependent vesting schedules are very difficult to expense when it comes to Stock Comp Expense. Carta and other softwares can't really handle these types of awards and simply exclude them from the stock comp calculation, because no one can tell if/when the milestone will be achieved. So I'd keep that in mind if you're thinking about adding some funky vesting to an equity award.

I guess I'll go first! Have you seen any unique or interesting vesting requirements? Any in terms of time or performance that stand out from the norm? 

Hello, Carta Community and equity friends alike! My name is Chris and I am the founder of Equity Admin Co. We are a firm that specializes in Equity Administration for companies who use Carta. We provide standard equity administration and cap table updates - issuances, transfers, modifications, etc. - financial reporting (ASC 718) help, and anything else equity related that is done on or off Carta's platform.

It was in 2018, when I started working at Carta, that I discovered I could have a career in equity. I had previously been in college for 7 years and could never find a degree or topic that I was passionate about. When I started at Carta and discovered this new world, I walked away from school without hesitation - I had found my passion!

In 2019, a new role at Carta opened up as a Stock Plan Administrator. We offered an additional service to take the actual management of the cap table out of the hands of the company executives and their attorneys, and it was a huge hit among Carta customers. A few months later I left on paternity leave with my first son, and while I was out, my boss decided to leave Carta…I came back a month later and they told me they were no longer going to offer our service, but that I could keep working with my current clients until their contracts were up. For the next year, I continued my work and also worked a different position at Carta, but I missed actually managing cap tables full-time. In August 2020 I talked to Carta about starting my own firm that specialized in their platform, and they were more than supportive.

I was able to take my business full-time in March 2021 and we now have a team of 7 additional consultants (almost all ex-Carta) who help manage company cap tables and equity data. We have 40+ current clients that range from newly-incorporated startups to massive decacorns. The total valuation of our clients is above $90 billion, and we're blessed to work with some of the most amazing founders and companies on the planet.

I want to share some cap table and equity tips for founders:

1. Make sure your cap table is up-to-date from the incorporation of your company. The sooner you ensure accuracy (and maintain it), the less money you'll spend later trying to go back through years of documents to make sure it's right - and the less headache you'll have during an audit or due diligence in the future.
2. Assign one person to manage your cap table (whether that's internal or external), and make sure they have bandwidth to handle it and make sure it's up-to-date. Your equity is simple to manage when you first begin, but if you scale quickly, it can be difficult to keep up with it when you don't have someone dedicated to it.
3. When offering equity to your employees, be open and transparent with them regarding what type of equity they are receiving, how much they are receiving, and what it's currently worth (FMV & preferred price, if applicable). The more answers you can offer up front, the less you'll have to worry about your employees being distrusting or disheartened later, because they feel like you were dishonest early on.

Now is the time - Ask me anything!

Right?! Have you come across any funky vesting schedules?

Very interesting to hear what others are doing. Thanks for the reply.

Hey @Carlos Guzman! Great to hear from you. About 90% of the vesting schedules I see for option grants are 1/48 monthly, 1 year cliff, and the majority of RSU vesting schedules I see are 1/12 quarterly with a one year cliff (some companies will also do bi-annually or annual vesting on their RSUs if they are single-trigger, because it's easier to manage and more cost effective for the company).

But here are a few unique vesting schedules I've seen recently:

• X number of shares vest per hour worked by the consultant or advisor (so the stakeholder simply works hours until they've vested all their options)
• 1/4 vests as soon as the department that the stakeholder is in hits $10M in recurring revenue, then the second 1/4 will vest 12 months following that date (this can be good motivation for a new product line that's released and the company wants to give their employees extra incentive to grow the new product line)
• Vesting is dependent on stakeholder's ability to introduce investors to the company who will invest at least $5M into company's seed round
• Vesting is dependent on stakeholder's ability to help the company expand their product line into [insert Asian country here]

Vesting is cool because it's incredibly flexible, and performance and milestone-based vesting are awesome ways to incentivize people to get stuff done; however, these types of complicated or event/performance-dependent vesting schedules are very difficult to expense when it comes to Stock Comp Expense. Carta and other softwares can't really handle these types of awards and simply exclude them from the stock comp calculation, because no one can tell if/when the milestone will be achieved. So I'd keep that in mind if you're thinking about adding some funky vesting to an equity award.

I guess I'll go first! Have you seen any unique or interesting vesting requirements? Any in terms of time or performance that stand out from the norm? 

Hello, Carta Community and equity friends alike! My name is Chris and I am the founder of Equity Admin Co. We are a firm that specializes in Equity Administration for companies who use Carta. We provide standard equity administration and cap table updates - issuances, transfers, modifications, etc. - financial reporting (ASC 718) help, and anything else equity related that is done on or off Carta's platform.

It was in 2018, when I started working at Carta, that I discovered I could have a career in equity. I had previously been in college for 7 years and could never find a degree or topic that I was passionate about. When I started at Carta and discovered this new world, I walked away from school without hesitation - I had found my passion!

In 2019, a new role at Carta opened up as a Stock Plan Administrator. We offered an additional service to take the actual management of the cap table out of the hands of the company executives and their attorneys, and it was a huge hit among Carta customers. A few months later I left on paternity leave with my first son, and while I was out, my boss decided to leave Carta…I came back a month later and they told me they were no longer going to offer our service, but that I could keep working with my current clients until their contracts were up. For the next year, I continued my work and also worked a different position at Carta, but I missed actually managing cap tables full-time. In August 2020 I talked to Carta about starting my own firm that specialized in their platform, and they were more than supportive.

I was able to take my business full-time in March 2021 and we now have a team of 7 additional consultants (almost all ex-Carta) who help manage company cap tables and equity data. We have 40+ current clients that range from newly-incorporated startups to massive decacorns. The total valuation of our clients is above $90 billion, and we're blessed to work with some of the most amazing founders and companies on the planet.

I want to share some cap table and equity tips for founders:

1. Make sure your cap table is up-to-date from the incorporation of your company. The sooner you ensure accuracy (and maintain it), the less money you'll spend later trying to go back through years of documents to make sure it's right - and the less headache you'll have during an audit or due diligence in the future.
2. Assign one person to manage your cap table (whether that's internal or external), and make sure they have bandwidth to handle it and make sure it's up-to-date. Your equity is simple to manage when you first begin, but if you scale quickly, it can be difficult to keep up with it when you don't have someone dedicated to it.
3. When offering equity to your employees, be open and transparent with them regarding what type of equity they are receiving, how much they are receiving, and what it's currently worth (FMV & preferred price, if applicable). The more answers you can offer up front, the less you'll have to worry about your employees being distrusting or disheartened later, because they feel like you were dishonest early on.

Now is the time - Ask me anything!

I have heard of some interesting performance-based vesting schedules around product launches and sales numbers, but I haven't worked with anything personally. Everything that I've seen directly is 1/48 monthly, 1 year cliff.

Right?! Have you come across any funky vesting schedules?

Very interesting to hear what others are doing. Thanks for the reply.

Hey @Carlos Guzman! Great to hear from you. About 90% of the vesting schedules I see for option grants are 1/48 monthly, 1 year cliff, and the majority of RSU vesting schedules I see are 1/12 quarterly with a one year cliff (some companies will also do bi-annually or annual vesting on their RSUs if they are single-trigger, because it's easier to manage and more cost effective for the company).

But here are a few unique vesting schedules I've seen recently:

• X number of shares vest per hour worked by the consultant or advisor (so the stakeholder simply works hours until they've vested all their options)
• 1/4 vests as soon as the department that the stakeholder is in hits $10M in recurring revenue, then the second 1/4 will vest 12 months following that date (this can be good motivation for a new product line that's released and the company wants to give their employees extra incentive to grow the new product line)
• Vesting is dependent on stakeholder's ability to introduce investors to the company who will invest at least $5M into company's seed round
• Vesting is dependent on stakeholder's ability to help the company expand their product line into [insert Asian country here]

Vesting is cool because it's incredibly flexible, and performance and milestone-based vesting are awesome ways to incentivize people to get stuff done; however, these types of complicated or event/performance-dependent vesting schedules are very difficult to expense when it comes to Stock Comp Expense. Carta and other softwares can't really handle these types of awards and simply exclude them from the stock comp calculation, because no one can tell if/when the milestone will be achieved. So I'd keep that in mind if you're thinking about adding some funky vesting to an equity award.

I guess I'll go first! Have you seen any unique or interesting vesting requirements? Any in terms of time or performance that stand out from the norm? 

Hello, Carta Community and equity friends alike! My name is Chris and I am the founder of Equity Admin Co. We are a firm that specializes in Equity Administration for companies who use Carta. We provide standard equity administration and cap table updates - issuances, transfers, modifications, etc. - financial reporting (ASC 718) help, and anything else equity related that is done on or off Carta's platform.

It was in 2018, when I started working at Carta, that I discovered I could have a career in equity. I had previously been in college for 7 years and could never find a degree or topic that I was passionate about. When I started at Carta and discovered this new world, I walked away from school without hesitation - I had found my passion!

In 2019, a new role at Carta opened up as a Stock Plan Administrator. We offered an additional service to take the actual management of the cap table out of the hands of the company executives and their attorneys, and it was a huge hit among Carta customers. A few months later I left on paternity leave with my first son, and while I was out, my boss decided to leave Carta…I came back a month later and they told me they were no longer going to offer our service, but that I could keep working with my current clients until their contracts were up. For the next year, I continued my work and also worked a different position at Carta, but I missed actually managing cap tables full-time. In August 2020 I talked to Carta about starting my own firm that specialized in their platform, and they were more than supportive.

I was able to take my business full-time in March 2021 and we now have a team of 7 additional consultants (almost all ex-Carta) who help manage company cap tables and equity data. We have 40+ current clients that range from newly-incorporated startups to massive decacorns. The total valuation of our clients is above $90 billion, and we're blessed to work with some of the most amazing founders and companies on the planet.

I want to share some cap table and equity tips for founders:

1. Make sure your cap table is up-to-date from the incorporation of your company. The sooner you ensure accuracy (and maintain it), the less money you'll spend later trying to go back through years of documents to make sure it's right - and the less headache you'll have during an audit or due diligence in the future.
2. Assign one person to manage your cap table (whether that's internal or external), and make sure they have bandwidth to handle it and make sure it's up-to-date. Your equity is simple to manage when you first begin, but if you scale quickly, it can be difficult to keep up with it when you don't have someone dedicated to it.
3. When offering equity to your employees, be open and transparent with them regarding what type of equity they are receiving, how much they are receiving, and what it's currently worth (FMV & preferred price, if applicable). The more answers you can offer up front, the less you'll have to worry about your employees being distrusting or disheartened later, because they feel like you were dishonest early on.

Now is the time - Ask me anything!

Hello, Carta Community and equity friends alike! My name is Chris and I am the founder of Equity Admin Co. We are a firm that specializes in Equity Administration for companies who use Carta. We provide standard equity administration and cap table updates - issuances, transfers, modifications, etc. - financial reporting (ASC 718) help, and anything else equity related that is done on or off Carta's platform.

It was in 2018, when I started working at Carta, that I discovered I could have a career in equity. I had previously been in college for 7 years and could never find a degree or topic that I was passionate about. When I started at Carta and discovered this new world, I walked away from school without hesitation - I had found my passion!

In 2019, a new role at Carta opened up as a Stock Plan Administrator. We offered an additional service to take the actual management of the cap table out of the hands of the company executives and their attorneys, and it was a huge hit among Carta customers. A few months later I left on paternity leave with my first son, and while I was out, my boss decided to leave Carta…I came back a month later and they told me they were no longer going to offer our service, but that I could keep working with my current clients until their contracts were up. For the next year, I continued my work and also worked a different position at Carta, but I missed actually managing cap tables full-time. In August 2020 I talked to Carta about starting my own firm that specialized in their platform, and they were more than supportive.

I was able to take my business full-time in March 2021 and we now have a team of 7 additional consultants (almost all ex-Carta) who help manage company cap tables and equity data. We have 40+ current clients that range from newly-incorporated startups to massive decacorns. The total valuation of our clients is above $100 billion, and we're blessed to work with some of the most amazing founders and companies on the planet.

I want to share some cap table and equity tips for founders:

1. Make sure your cap table is up-to-date FROM THE START (incorporation) of your company. The sooner you ensure accuracy (and maintain it), the less money and time you'll spend later trying to go back through years of documents to make sure it's right - and the less headache you'll have during an audit or due diligence in the future.
2. Assign one main person to manage your cap table (whether that's internal or external to your company), and make sure they have bandwidth & knowledge to handle it, and make sure it's up-to-date. Your equity is simple to manage when you first begin, but if you scale quickly, it can be difficult to keep up with it when you don't have someone dedicated to it.
3. When offering equity to your employees, be open and transparent with them regarding what type of equity they are receiving, how much they are receiving, and what it's currently worth (FMV & preferred price, if applicable). The more answers you can offer up front, the less you'll have to worry about your employees being distrusting or disheartened later, because they feel like you were dishonest early on.

Now is the time - Ask me anything!

------------------------------
Chris Hoffmann
Founder, Equity Admin Co. - Carta admin for pre-IPO companies
https://www.equityadmin.co/
801.420.0441
------------------------------

Hi Chris -

For secondaries and our outside advisor has advised that we need to use sale price to calculate taxes due.  Any suggestions on how to reflect non-409A price is used for the taxation, gain etc?  My concern is the Exercise and settled report shows the gain based off from the 409A in place at the time of exercise.

Appreciate insight on how best to document.

Thank you.

Christie

Hello, Carta Community and equity friends alike! My name is Chris and I am the founder of Equity Admin Co. We are a firm that specializes in Equity Administration for companies who use Carta. We provide standard equity administration and cap table updates - issuances, transfers, modifications, etc. - financial reporting (ASC 718) help, and anything else equity related that is done on or off Carta's platform.

It was in 2018, when I started working at Carta, that I discovered I could have a career in equity. I had previously been in college for 7 years and could never find a degree or topic that I was passionate about. When I started at Carta and discovered this new world, I walked away from school without hesitation - I had found my passion!

In 2019, a new role at Carta opened up as a Stock Plan Administrator. We offered an additional service to take the actual management of the cap table out of the hands of the company executives and their attorneys, and it was a huge hit among Carta customers. A few months later I left on paternity leave with my first son, and while I was out, my boss decided to leave Carta…I came back a month later and they told me they were no longer going to offer our service, but that I could keep working with my current clients until their contracts were up. For the next year, I continued my work and also worked a different position at Carta, but I missed actually managing cap tables full-time. In August 2020 I talked to Carta about starting my own firm that specialized in their platform, and they were more than supportive.

I was able to take my business full-time in March 2021 and we now have a team of 7 additional consultants (almost all ex-Carta) who help manage company cap tables and equity data. We have 40+ current clients that range from newly-incorporated startups to massive decacorns. The total valuation of our clients is above $100 billion, and we're blessed to work with some of the most amazing founders and companies on the planet.

I want to share some cap table and equity tips for founders:

1. Make sure your cap table is up-to-date FROM THE START (incorporation) of your company. The sooner you ensure accuracy (and maintain it), the less money and time you'll spend later trying to go back through years of documents to make sure it's right - and the less headache you'll have during an audit or due diligence in the future.
2. Assign one main person to manage your cap table (whether that's internal or external to your company), and make sure they have bandwidth & knowledge to handle it, and make sure it's up-to-date. Your equity is simple to manage when you first begin, but if you scale quickly, it can be difficult to keep up with it when you don't have someone dedicated to it.
3. When offering equity to your employees, be open and transparent with them regarding what type of equity they are receiving, how much they are receiving, and what it's currently worth (FMV & preferred price, if applicable). The more answers you can offer up front, the less you'll have to worry about your employees being distrusting or disheartened later, because they feel like you were dishonest early on.

Now is the time - Ask me anything!

------------------------------
Chris Hoffmann
Founder, Equity Admin Co. - Carta admin for pre-IPO companies
https://www.equityadmin.co/
801.420.0441
------------------------------

Hey @Christie Johnson! What an interesting and fascinating question - here's a question to make sure I'm understanding the situation correctly:

The secondaries you're talking about - are they through a Company Buyback or Tender Offer? Or is it certain employees or stakeholders who are finding outside (or inside) investors and selling them their shares?

When it comes to taxation of employees, typically the only time the issuing company is required to withhold taxes is upon exercise of an NSO, and in that case, the tax withholding is based on the FMV at the time of exercise. If the employee is then going and selling their shares to an investor, while the transfer needs to be agreed upon by the company, usually the taxes upon sale are the employee's responsibility. And yes, those taxes would be dependent upon the gain that the employee received upon sale (excluding the taxes they already paid).

If this is through a Tender Offer, there may be some differences because that's governed by the issuing company. Let me know if you have some more information or anything to clarify your initial question and I'm happy to help out! 😊 

------------------------------
Chris Hoffmann
Founder, Equity Admin Co. - Carta admin for pre-IPO companies
https://www.equityadmin.co/
801.420.0441

Original Message:
Sent: 09-14-2023 12:23
From: Christie Johnson
Subject: Ask an Equity Admin with Chris Hoffmann

Hi Chris -

For secondaries and our outside advisor has advised that we need to use sale price to calculate taxes due.  Any suggestions on how to reflect non-409A price is used for the taxation, gain etc?  My concern is the Exercise and settled report shows the gain based off from the 409A in place at the time of exercise.

Appreciate insight on how best to document.

Thank you.

Christie

------------------------------
Christie Johnson

Original Message:
Sent: 09-14-2023 12:02
From: Chris Hoffmann
Subject: Ask an Equity Admin with Chris Hoffmann

Hello, Carta Community and equity friends alike! My name is Chris and I am the founder of Equity Admin Co. We are a firm that specializes in Equity Administration for companies who use Carta. We provide standard equity administration and cap table updates - issuances, transfers, modifications, etc. - financial reporting (ASC 718) help, and anything else equity related that is done on or off Carta's platform.

It was in 2018, when I started working at Carta, that I discovered I could have a career in equity. I had previously been in college for 7 years and could never find a degree or topic that I was passionate about. When I started at Carta and discovered this new world, I walked away from school without hesitation - I had found my passion!

In 2019, a new role at Carta opened up as a Stock Plan Administrator. We offered an additional service to take the actual management of the cap table out of the hands of the company executives and their attorneys, and it was a huge hit among Carta customers. A few months later I left on paternity leave with my first son, and while I was out, my boss decided to leave Carta…I came back a month later and they told me they were no longer going to offer our service, but that I could keep working with my current clients until their contracts were up. For the next year, I continued my work and also worked a different position at Carta, but I missed actually managing cap tables full-time. In August 2020 I talked to Carta about starting my own firm that specialized in their platform, and they were more than supportive.

I was able to take my business full-time in March 2021 and we now have a team of 7 additional consultants (almost all ex-Carta) who help manage company cap tables and equity data. We have 40+ current clients that range from newly-incorporated startups to massive decacorns. The total valuation of our clients is above $100 billion, and we're blessed to work with some of the most amazing founders and companies on the planet.

I want to share some cap table and equity tips for founders:

1. Make sure your cap table is up-to-date FROM THE START (incorporation) of your company. The sooner you ensure accuracy (and maintain it), the less money and time you'll spend later trying to go back through years of documents to make sure it's right - and the less headache you'll have during an audit or due diligence in the future.
2. Assign one main person to manage your cap table (whether that's internal or external to your company), and make sure they have bandwidth & knowledge to handle it, and make sure it's up-to-date. Your equity is simple to manage when you first begin, but if you scale quickly, it can be difficult to keep up with it when you don't have someone dedicated to it.
3. When offering equity to your employees, be open and transparent with them regarding what type of equity they are receiving, how much they are receiving, and what it's currently worth (FMV & preferred price, if applicable). The more answers you can offer up front, the less you'll have to worry about your employees being distrusting or disheartened later, because they feel like you were dishonest early on.

Now is the time - Ask me anything!

------------------------------
Chris Hoffmann
Founder, Equity Admin Co. - Carta admin for pre-IPO companies
https://www.equityadmin.co/
801.420.0441
------------------------------

Hey Chris & Christie -

If we're talking about a secondary transaction (tender offer) with either a third-party buyer or accompanying a primary, pricing is typically determined at arms-length; the most common legal opinion we see in this case is that the sale price represents the "market value" of the security during the transaction period and should be used as the FMV. If the buyer/issuing company are allowing shares underlying options to be sold via cashless exercise, the spread between the exercise price and sale price are generally taxable as ordinary income at supplemental rates regardless of whether the option is an ISO or NSO.

This can be tricky to reflect on Carta because, as @Christie Johnson notes, there can be discrepancies in reporting. For our liquidity clients, we often suggest that they add a Board Determined FMV on their Carta 409A page covering the secondary offering period, along with disallowing cash exercising for stakeholders not participating in the secondary offer during that offering period; this helps prevent inadvertent cash exercises that could  be taxable at the sale price rather than the 409A FMV.

If a transaction is a company buyback that isn't taking place alongside a primary but the sale price still exceeds the 409A FMV,  we may be stepping into compensatory tax treatment territory. This scenario is quite a bit more complicated and we suggest seeking an opinion from your auditors in addition to your outside counsel.

------------------------------
Drew Daniels, ECA
Liquidity Services @ Carta Capital Markets
------------------------------

Original Message:
Sent: 09-14-2023 12:43
From: Chris Hoffmann
Subject: Ask an Equity Admin with Chris Hoffmann

Hey @Christie Johnson! What an interesting and fascinating question - here's a question to make sure I'm understanding the situation correctly:

The secondaries you're talking about - are they through a Company Buyback or Tender Offer? Or is it certain employees or stakeholders who are finding outside (or inside) investors and selling them their shares?

When it comes to taxation of employees, typically the only time the issuing company is required to withhold taxes is upon exercise of an NSO, and in that case, the tax withholding is based on the FMV at the time of exercise. If the employee is then going and selling their shares to an investor, while the transfer needs to be agreed upon by the company, usually the taxes upon sale are the employee's responsibility. And yes, those taxes would be dependent upon the gain that the employee received upon sale (excluding the taxes they already paid).

If this is through a Tender Offer, there may be some differences because that's governed by the issuing company. Let me know if you have some more information or anything to clarify your initial question and I'm happy to help out! 😊 

------------------------------
Chris Hoffmann
Founder, Equity Admin Co. - Carta admin for pre-IPO companies
https://www.equityadmin.co/
801.420.0441

Original Message:
Sent: 09-14-2023 12:23
From: Christie Johnson
Subject: Ask an Equity Admin with Chris Hoffmann

Hi Chris -

For secondaries and our outside advisor has advised that we need to use sale price to calculate taxes due.  Any suggestions on how to reflect non-409A price is used for the taxation, gain etc?  My concern is the Exercise and settled report shows the gain based off from the 409A in place at the time of exercise.

Appreciate insight on how best to document.

Thank you.

Christie

------------------------------
Christie Johnson

Original Message:
Sent: 09-14-2023 12:02
From: Chris Hoffmann
Subject: Ask an Equity Admin with Chris Hoffmann

Hello, Carta Community and equity friends alike! My name is Chris and I am the founder of Equity Admin Co. We are a firm that specializes in Equity Administration for companies who use Carta. We provide standard equity administration and cap table updates - issuances, transfers, modifications, etc. - financial reporting (ASC 718) help, and anything else equity related that is done on or off Carta's platform.

It was in 2018, when I started working at Carta, that I discovered I could have a career in equity. I had previously been in college for 7 years and could never find a degree or topic that I was passionate about. When I started at Carta and discovered this new world, I walked away from school without hesitation - I had found my passion!

In 2019, a new role at Carta opened up as a Stock Plan Administrator. We offered an additional service to take the actual management of the cap table out of the hands of the company executives and their attorneys, and it was a huge hit among Carta customers. A few months later I left on paternity leave with my first son, and while I was out, my boss decided to leave Carta…I came back a month later and they told me they were no longer going to offer our service, but that I could keep working with my current clients until their contracts were up. For the next year, I continued my work and also worked a different position at Carta, but I missed actually managing cap tables full-time. In August 2020 I talked to Carta about starting my own firm that specialized in their platform, and they were more than supportive.

I was able to take my business full-time in March 2021 and we now have a team of 7 additional consultants (almost all ex-Carta) who help manage company cap tables and equity data. We have 40+ current clients that range from newly-incorporated startups to massive decacorns. The total valuation of our clients is above $100 billion, and we're blessed to work with some of the most amazing founders and companies on the planet.

I want to share some cap table and equity tips for founders:

1. Make sure your cap table is up-to-date FROM THE START (incorporation) of your company. The sooner you ensure accuracy (and maintain it), the less money and time you'll spend later trying to go back through years of documents to make sure it's right - and the less headache you'll have during an audit or due diligence in the future.
2. Assign one main person to manage your cap table (whether that's internal or external to your company), and make sure they have bandwidth & knowledge to handle it, and make sure it's up-to-date. Your equity is simple to manage when you first begin, but if you scale quickly, it can be difficult to keep up with it when you don't have someone dedicated to it.
3. When offering equity to your employees, be open and transparent with them regarding what type of equity they are receiving, how much they are receiving, and what it's currently worth (FMV & preferred price, if applicable). The more answers you can offer up front, the less you'll have to worry about your employees being distrusting or disheartened later, because they feel like you were dishonest early on.

Now is the time - Ask me anything!

------------------------------
Chris Hoffmann
Founder, Equity Admin Co. - Carta admin for pre-IPO companies
https://www.equityadmin.co/
801.420.0441
------------------------------

Hello, Carta Community and equity friends alike! My name is Chris and I am the founder of Equity Admin Co. We are a firm that specializes in Equity Administration for companies who use Carta. We provide standard equity administration and cap table updates - issuances, transfers, modifications, etc. - financial reporting (ASC 718) help, and anything else equity related that is done on or off Carta's platform.

It was in 2018, when I started working at Carta, that I discovered I could have a career in equity. I had previously been in college for 7 years and could never find a degree or topic that I was passionate about. When I started at Carta and discovered this new world, I walked away from school without hesitation - I had found my passion!

In 2019, a new role at Carta opened up as a Stock Plan Administrator. We offered an additional service to take the actual management of the cap table out of the hands of the company executives and their attorneys, and it was a huge hit among Carta customers. A few months later I left on paternity leave with my first son, and while I was out, my boss decided to leave Carta…I came back a month later and they told me they were no longer going to offer our service, but that I could keep working with my current clients until their contracts were up. For the next year, I continued my work and also worked a different position at Carta, but I missed actually managing cap tables full-time. In August 2020 I talked to Carta about starting my own firm that specialized in their platform, and they were more than supportive.

I was able to take my business full-time in March 2021 and we now have a team of 7 additional consultants (almost all ex-Carta) who help manage company cap tables and equity data. We have 40+ current clients that range from newly-incorporated startups to massive decacorns. The total valuation of our clients is above $100 billion, and we're blessed to work with some of the most amazing founders and companies on the planet.

I want to share some cap table and equity tips for founders:

1. Make sure your cap table is up-to-date FROM THE START (incorporation) of your company. The sooner you ensure accuracy (and maintain it), the less money and time you'll spend later trying to go back through years of documents to make sure it's right - and the less headache you'll have during an audit or due diligence in the future.
2. Assign one main person to manage your cap table (whether that's internal or external to your company), and make sure they have bandwidth & knowledge to handle it, and make sure it's up-to-date. Your equity is simple to manage when you first begin, but if you scale quickly, it can be difficult to keep up with it when you don't have someone dedicated to it.
3. When offering equity to your employees, be open and transparent with them regarding what type of equity they are receiving, how much they are receiving, and what it's currently worth (FMV & preferred price, if applicable). The more answers you can offer up front, the less you'll have to worry about your employees being distrusting or disheartened later, because they feel like you were dishonest early on.

Now is the time - Ask me anything!

------------------------------
Chris Hoffmann
Founder, Equity Admin Co. - Carta admin for pre-IPO companies
https://www.equityadmin.co/
801.420.0441
------------------------------