Equity Compensation 101
By Gary T. Moyer, April 11, 2000

Recapitalization - Pros and Cons

• Advantages

• Employee only gets appreciation in the Company - the value at the date of grant is retained by the founder

• Employee recognizes no taxable income on stock grant, gets capital gain on sale of stock

• Disadvantages

• Cannot be done with a Subchapter S corporation (a Sub-S corporation can only have one class of stock)

• Company gets no compensation deduction

• Complicated

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