# Tax on Equity Compensation for Independent Contractor



## mayur553 (Aug 2, 2019)

Hi Experts, I need your help with this unique situation i am facing.

I am planning to sign a services contract as an Independent contractor / Corporation / Sole Proprietorship, with a Canadian Startup. And the startup wants to pay me in equity, which has 0 value as of date. I understand i would have an immediate tax liability on the equity compensation i receive.

Is there a way to structure this transaction, where i do not have to pay tax unless i can monetize those equity shares at a future date? Would sweat equity agreement help me defer my tax liability? Is there any way to structure this transaction?

Thanks.


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## gardner (Feb 13, 2014)

Perhaps structuring as stock options would be more appropriate:

https://www.canada.ca/en/revenue-ag...a-security-stock-options-taxable-benefit.html

Equity is particularly risky if it has a vestment or holding period. People have gotten totally ruined by receiving M$ grants of stock that then dropped to nothing during the vesting period and left them with gargantuan tax bills and no money. If it were me, I would consult a lawyer.


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## mayur553 (Aug 2, 2019)

Thanks for your response. Perhaps stock option would have been an ideal structure, if i was an employee. However, if i receive stock option as an independent contractor, then i am liable to pay tax on those stock option and cannot defer that untill i actually excersise the option.


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