The impression I'm getting is that he's going to have to pay taxes on the difference between the strike price of $0.0001/share and the investment price that's now established, to the tune of paying $10,000s of dollars for what are likely worthless shares if/when he stops working for them.
If that is correct, at this point nobody wins. At best from his viewpoint, the company covers his tax bill (or I suppose establishes a new investment price a lot lower through bankruptcy or whatever). Much more likely is that he's going to have to weigh whether suing them and the likely payoff of that will be higher than the tax bill; hmmm, he'd better get a reading on whether he can pierce the corporate veil and go after them directly. Heck, he also needs to see if he can arrange a payment plan with the tax authorities, as others have mentioned; that bill will be due very soon, whatever the final outcome of a lawsuit is.
They're indeed snakes, the shares are indeed almost certainly worthless, but not for the purposes of his 2014 personal tax year :(. ADDED: unless, as others have pointed out, the investment was structured as debt instead of equity.
Yet another example why non-founder options/stock is frequently a negative.
If that is correct, at this point nobody wins. At best from his viewpoint, the company covers his tax bill (or I suppose establishes a new investment price a lot lower through bankruptcy or whatever). Much more likely is that he's going to have to weigh whether suing them and the likely payoff of that will be higher than the tax bill; hmmm, he'd better get a reading on whether he can pierce the corporate veil and go after them directly. Heck, he also needs to see if he can arrange a payment plan with the tax authorities, as others have mentioned; that bill will be due very soon, whatever the final outcome of a lawsuit is.
They're indeed snakes, the shares are indeed almost certainly worthless, but not for the purposes of his 2014 personal tax year :(. ADDED: unless, as others have pointed out, the investment was structured as debt instead of equity.
Yet another example why non-founder options/stock is frequently a negative.