Question
If the founders put their own money into a bootstrapped early-stage startup (C Corp), how are those contributions accounted for? If the founders don't want them to become debt, is the money merely deposited and then that's it? How does this show up on the balance sheet?
Does the amount factor into the tax basis of their existing stock, or have any other tax implications? And does it matter if the contributions are not relative to the founders' respective percentages of ownership? What's the best way to handle this?
Answers: 1 public & 0 private
Either issue shares (whether common or redeemable prefs) and put into capital account ledger or else put in holding trust and issue license +loan to trading arm. Basic equation equity = asset - debt, just be careful to keep the equity positive as regulators have a dislike of companies trading whilst insolvent. I can,t speak to tax matters but % and vesting in a separate shareholder and employee agreement
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