Hi there,
Here is my situation:
I am starting a small business. I have a friend that is interested in investing in my business for an equity share. This investment of $60k for 25% equity would value my business at $240,000.
My lawyer informs me that I, and my other business partners, would each be liable to pay taxes on this asset. I'm young and it would be impossible for me to pay taxes on my share of $240,000, especially since it doesn't correspond to any actual cash increase. My business have no income yet.
Is it true that I have to pay taxes on my share of the valuation of my business? How can any young person capitalize a small business with this type of tax in place?
Thank you for your time and help!
Here is my situation:
I am starting a small business. I have a friend that is interested in investing in my business for an equity share. This investment of $60k for 25% equity would value my business at $240,000.
My lawyer informs me that I, and my other business partners, would each be liable to pay taxes on this asset. I'm young and it would be impossible for me to pay taxes on my share of $240,000, especially since it doesn't correspond to any actual cash increase. My business have no income yet.
Is it true that I have to pay taxes on my share of the valuation of my business? How can any young person capitalize a small business with this type of tax in place?
Thank you for your time and help!