Planning for Year End

12/5/2023

It is December which means it’s officially time to prepare for the year end activities. From an equity standpoint, there are a number of items that must be done to be in compliance with the IRS. The best advice we can give is to have a checklist and a calendar in place to ensure nothing gets missed. Here are some of the most common items to think about. 

Multi departmental calendar coordination. Many activities require communication with the HR team, the finance team, and the legal team. People like taking PTO during the holidays so coordinating who’s going to be available is crucial to avoid a last-minute scramble to contact people who are trying to spend time with their family. You may find that you actually need to get everything coordinated by mid-December!

Figure out what activities will be taking place. For example, is there an RSU release happening on the 31st? Is there anyone leaving before year end? Any moves to different departments that need to be added? Are all participant demographics updated such as home addresses? Are there any grant modifications that need to be executed? Are there any one-off exceptions that the management team is aware of like a last minute grant or post term extension or vesting acceleration?

Once the new year hits, if you have your equity system linked to your HRIS for year-to-date taxes you’ll want to make sure they are reset or are scheduled to be reset at the beginning of the year. You’ll need to ensure all income is captured from RSU releases or option exercises into the payroll systems. That info will be needed for proper employee W-2 and non-employee 1099-NEC tax forms. You’ll need to generate the 3921 tax forms for any ISO exercises during the year. Accuracy is paramount here so look for correct SSNs, addresses, market price at time of exercise, etc. An often overlooked item during the 3921 tax form generation process is to take a step back and make sure any ISOs that were disqualified are properly accounted for. Just because the board approved an employee’s post termination exercise window for a year, doesn’t mean they get to keep the ISO tax treatment!

Once all activity is recorded for the year, you will also need to capture the stock-based compensation and lock down your expense data with a snapshot. All the activity should tie out on the disclosures footnotes. If you have any performance awards, were any triggers met or do any estimations need to be made? It takes an exponential amount of work to go back and fix things, so ensure everything is correct before you lock down the expense data. 

Having a plan with coverage spelled out will make for a smooth year end. These are just some of the things to think about but certainly not all of them. At Einstein Equity we would love to partner with you to come up with that plan that is specific to your company! 

Miguel & Mariló

Introducing Einstein Equity

10/24/2023

I founded Einstein Equity with a simple mission: to help private companies manage their complex equity plans on the most robust platform that can scale as the companies grow from startup through IPO. 

I spent many years learning how the Shareworks platform could handle virtually any equity request we'd get, but you just had to know how to leverage the platform. Whether it was a simple ASC 718 financial reporting request to break out the journal entry by cost center, to the more complex request to break it down with mobility to account for the time people spent in each cost center to account for transfers, there was always a way to capture it without resorting to hours of manual Excel transformations after the fact. The customizable reporting engine could capture almost every combination of calculation you can dream of. Looking back, these were the types of requests that I enjoyed the most during my time at Solium and then subsequently Morgan Stanley. 

When I met Mariló, she had very specific technical questions that I enjoyed rolling up my sleeves to get her the right answer. We'd get pretty technical and in the weeds but would always figure out how to come up with the perfect customized report to prove out that disclosure footnote. We developed a rapport and I got to know her as a person. She had similar values and was already a consultant with a focus on Shareworks as the platform of choice. When this opportunity came up years later, it was a no-brainer to work together. With our names both being MC, the idea of MC squared immediately came up and of course the E in his famous energy equation had to stand for EQUITY. 

Fast forward to what makes Einstein Equity so unique. Our deep industry equity expertise combined with hundreds of private company configurations we've seen means that we can come up with the perfect setup. There are plenty of opportunities to promote automation to reduce risk and provide consistent reporting to give a real time pulse into your equity program. In order to raise a new round of funding, prepare for a tender offer or prepare for an IPO, the equity data has to be in a good state. We know what's important and can deliver consistent results so you're always prepared. 

I've received such a warm welcome from everyone, including many firms who would be considered competitors.  Thank you to everyone who has reached out. We're beyond excited to get started immediately and service this industry. 

Miguel