Debt financing and employee equity compensation offer many benefits, but tech startup companies should consider the financial reporting implications.
Tech startup companies face many challenges. Some of the most common problems often involve two critical areas of concern: 1) obtaining financing when the company has little or no operating or credit history, and 2) attracting talented personnel when it has limited cash available for salaries and benefits.
The good news is tech startups often are able to address such issues by offering investors or sought-after employees a future stake in the business. The bad news is such equity offerings often raise complex accounting and financial reporting issues.
Complex financing and compensation arrangements are prevalent for many technology sector startups, and having a keen eye for critical contract provisions could help company owners anticipate the need to perform complex accounting analyses.