I've been working as part of a start-up for the past 8 months and have been issued a cofounder equity opportunity with a few other people. We've been waiting to get the official stock agreements as we've worked on closing business. With some angel investment coming, the original founder decided to get 409A valuation done bringing the company's valuation up a few hundred thousand dollars. Now stock agreements are being worked on and me and the new cofounders are being asked to take a tax hit on our personal taxes because of the new valuation.
Shouldn't we have been issued our stock agreements prior to the first 409A valuation when the FMV was $0.00005 per share? We were issued advisor shares when initially jumping onboard at the FMV and paid essentially nothing. Now since we are coming on as cofounders, was this done backwards? Are there any fixes for this so the new cofounders aren't forced to take a tax hit?
Tricky area, and filled with traps laid by the IRS for the unwary. Best way would be for the company to compensate you with some extra stock with a new grant, or perhaps an accelerated vesting schedule.