It is quite common for start-up companies to use technology as a form of capital contribution. However, many details require careful attention in practice. The approach to handling tech equity varies depending on the nature of the company. The following guided Q&A helps analyze your company’s situation. Below are common questions that CPAs encounter with start-up companies:

1. “How much tech equity can the founders or founding team receive? What percentage or number of shares?”

1. Why this question arises:
The questioner may be an investor or a founder. Both have different expectations for tech equity arrangements and ask for different reasons.

2. Who receives the tech equity:
The questioner may have different definitions of “founding team,” which requires careful discussion.

3. How to arrange tech equity:
After careful discussion, allocation is made based on “percentage” or “number of shares.” Although both refer to the same equity concept, there is a key difference in communication:

• Shareholding ratio: focuses on who leads the company and who holds the higher proportion.
• Number of shares: focuses on holding a fixed number of shares, not directly linked to company leadership.

2. “How do you issue stock compensation to employees who helped build the company from the start?”

1. Why this question arises:
In the same boat together — distributing company shares to employees is a powerful incentive tool in the early stages.

2. Who receives the tech equity:
Employees.

3. How to arrange tech equity:
Founders transfer tech equity shares to employees. Note: issuing “stock options” (employee stock subscription rights) has a different meaning from distributing tech equity. Stock options allow eligible employees to subscribe to shares under specific conditions and participate in company operations. Tax treatment differs accordingly.

3. “Does tech equity require a valuation?”

1. Valuation is not always required to “generate” tech equity:
Even after valuation, the appraised amount may not be fully usable as tech equity contribution.

2. What qualifies as tech equity:
Patent certificates or trademark certificates are not necessarily required to obtain tech equity.

3. When valuation occurs:
Most commonly happens in inter-company investments. Major asset transactions by shareholders require a fair and impartial valuation report.

4. “What are the tax implications of tech equity?”

1. Deferred taxation period and timing:
The Statute for Industrial Innovation has special provisions for taxing tech equity. To encourage start-up development, taxation does not apply at the time of tech contribution — there are deferred tax provisions. Shareholders may choose to be taxed either “at the time of share transfer” or “at the time of share distribution,” selecting one of the two.

2. No-par-value shares:
“No-par-value shares” serve as an equity planning tool for modern start-ups. Companies are no longer restricted by share issuance price. Tech equity taxation and no-par-value share regulations have become new topics in equity planning.