Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

If I contribute founders capital to my company, do I need to…

Customer Question
If I contribute founders capital...
If I contribute founders capital to my company, do I need to file any paperwork with the SEC? If I accept money from investors, I need to file form D. Not sure if the same applies to me.
Submitted: 3 months ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 14 hours by:
3/22/2018
Tax Professional: rakhi.v, Tax Attorney replied 3 months ago
rakhi.v
rakhi.v, Tax Attorney
Category: Tax
Satisfied Customers: 4,550
Experience: Have graduated in Law with specialization & emphasis in Financial Laws and has working experience of over a decade.
Verified

Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

If you contributing to the founders capital, you will not be required to file Form D. If you are accepting money from the Investors, the requirement of filing Form D will apply. Let me explain.

In the first case, you are issuing Equity to the Founders.

First and foremost, “founders stock” is not an actual type of class of security. It is simply a term used to typically describe common stock that is granted to founders, usually in the form of restricted stock that is (and always should) be subject to vesting.

Securities Act Rule 4(a)(2) provides an exemption from registering an issuance of such securities not involving a public offering that is sold to people who take the initiative in founding or organizing the business.

In the other case, when you are accepting money from the Investors, this exemption will not apply and you will be required to file form D. When it comes to raising money from outside investors, founders need to be aware of various securities laws (state and federal) that may apply. Regardless of the fundraising structure (e.g. convertible debt, SAFEs, stock issuances, etc.) a startup needs to follow the registration requirements under Section 5 before issuing its securities.

The private placement exemption under Section 4(a)(2) of the Securities Act and the Section 506(b) safe harbor under Reg D are the two most common ways startups navigate through securities laws.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Ask Your Own Tax Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask rakhi.v Your Own Question
rakhi.v
rakhi.v
rakhi.v, Tax Attorney
Category: Tax
Satisfied Customers: 4,550
4,550 Satisfied Customers
Experience: Have graduated in Law with specialization & emphasis in Financial Laws and has working experience of over a decade.

rakhi.v is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,512 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,569 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
Can a private individual invest in a non-profit organization
Can a private individual invest in a non-profit organization in the state of Iowa … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Considering establishing a family charitable foundation. Can
Considering establishing a family charitable foundation. Can i deduct 50% of my AGI in cash to a family charitable foundation? If not, what is the limit for cash to a family charitable foundation; lik… read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Some of my friends form a offshore company at Burmuda. They
Some of my friends form a offshore company at Burmuda. They want me to do something for the company and will give me company shares. They intend to keep all the profit at the company (without issuing … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
We established a C-Corporation (1000 shares, par value of .01
We established a C-Corporation (1000 shares, par value of .01 each) with two of the founders having 450 shares each, and the third founder having 100 shares. The third founder (100 shares) deposited $… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I am a one of 4 founders in a private company when is the stock
I am a one of 4 founders in a private company when is the stock we issued ourselves a taxable event?… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
Hi, We are setting up a Delaware C Corp. There are four
Hi, We are setting up a Delaware C Corp. There are four partners, one in US and 3 outside of US (India). The 2 founders are based out of India, one investor in US and the other in India. The sequence … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I am trying to establish the number of shares that I should
I am trying to establish the number of shares that I should offer investors for my start-up. I am trying to raise $4.5 M from investors. I have distributed ownership of the company as follows: 36 perc… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I made an excess withdrawal in 2011. I reversed it, but too
I made an excess withdrawal in 2011. I reversed it, but too late, so I have to file a form and pay a tax, but I'm not clear on the specifics.… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
I bought shares on nasdaq and then sold them. The company holdting
I bought shares on nasdaq and then sold them. The company holdting the the shares say that i must pay capital gains tax up front to release the profits.!!!!!!!!!… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
I am trying to do taxes for an LLC. Up until 2004, the LLC
I am trying to do taxes for an LLC. Up until 2004, the LLC allocated losses to members according to their ownership and not there basis. This caused many of the capital accounts to be very negative. T… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I do only online Spot or Cash Forex Trading at a very micro
I do only online Spot or Cash Forex Trading at a very micro level with the capital of $4000 only deposited in 2 Forex trading accounts with the same broker - FXCM , i am planning to file my taxes for … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Ok , when it is clear that i can only file my taxes under Sec.
Ok , when it is clear that i can only file my taxes under Sec. 988 because i do online spot or cash forex trading , Please explain me what to do now from my side to file taxes under 988 . FYI : I will… read more
USTaxAdvising
USTaxAdvising
Partner
Bachelor's Degree
609 satisfied customers
I have a one person LLC filing as S Corp. Last year I received
I have a one person LLC filing as S Corp. Last year I received investments into my company. How do I report this on my taxes. These individuals bought a percentage of the business but will not be part… read more
Jacy
Jacy
Bachelor's Degree
567 satisfied customers
I had investors that put money into opening a business. The
I had investors that put money into opening a business. The business failed and I would like to find out how they can write off their investment. They were not named as members on our LLC, so we could… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Im a full time Manager of an LLC. I invested lots of cash
I'm a full time Manager of an LLC. I invested lots of cash early on. CPA said I should be paid via "Guaranteed Payments" (GP) not payroll which I have done. The LLC then took in $ from outside investo… read more
RD
RD
Self Employed
Master's Degree
1,164 satisfied customers
I own a foreign software company, in jordan. I am selling
I own a foreign software company, in jordan. I am selling equity shares to American Investors. What reporting do I need to do in the US? What tax liabilities would the American Investors have? How wou… read more
Paul Taliefero
Paul Taliefero
Enrolled Agent
Bachelor Degree
110 satisfied customers
We are incorporating a company in Delaware and are unsure as
We are incorporating a company in Delaware and are unsure as to the number of shares to issue and what the tax implications are with relation to the scale of the number? Considering we will need inves… read more
Wayne Brasch
Wayne Brasch
Accountant and Business Consultant
Master Degree
718 satisfied customers
I am the sole shareholder of a C Corp. The C Corp had ...
I am the sole shareholder of a C Corp. The C Corp had several thousand dollars in startup expenses (prior to the start of the business on 11/1/03). In my 2003 C Corp return, I elected to amortize thos… read more
Christopher Phelps
Christopher Phelps
Sole Practitioner
Master Degree
1,180 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x