I believe there are special debits and credits for paying a consultant in stock options vs cash...What are the debits and credits if a consultant provides $50k of consulting and gets zero cash but gets $50k of stock options?
Stock options for consulting work rather than paying cash?
Answers
Typically I've called these "warrants", to distinguish from things that employees get that vest and that are reported differently.
I believe in your case it is a pretty simple DR: Contractor exp, CR: Warranty Liability. I'm pretty sure you use the 123(r) valuation for this.
Oh,
And check out Jim's technical note here:
https://www.proformative.com/questions/
How acceptable is this to the consultants? They may need the cash to pay their expenses, and the concentration of so much
For non-employee equity compensation plans ASC subtopic 505-50 also provides guidance.
Sometimes you choose to take stock options in lieu of cash, or as partial payment to help our a new company you really like. The downside though, is as a consultant, you don't have the measure of control that executive employees or board members have.
I'm very careful about making this decision - I have to really respect the CEO and other members of the team before I will cut a deal that doesn't include fair compensation for my services.
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