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Startup Accompaniment

Most of the expensive decisions in a startup are made in the first year — when nobody is thinking about tax yet. How the shares are split, who counts as an employee, when options are granted, and where the intellectual property sits. By the time the raise or the exit arrives, those decisions have already cost what they cost.

What the accompaniment covers

  • Incorporation and corporate structure — an Israeli company, a structure with a foreign parent, or a combination; and the tax consequences of each choice;
  • Bookkeeping and payroll adapted to a start-up's pace, including reporting by cost centre and project;
  • Employee option plans under section 102 — establishment, deposit with a trustee, vesting tracking and exercise;
  • Innovation Authority grants — applications, performance reports and audit;
  • Encouragement Law benefits — assessing eligibility for preferred technological enterprise status and applying it;
  • The Angels Law — positioning the company so investors can benefit from the relief;
  • Readiness for fundraising and due diligence — the statements, documents and answers an investor will ask for;
  • Exit support — deal structure, taxation of founders and employees, and spreading of consideration.

Three mistakes that recur in almost every startup

1. A founder working with no arrangement. Not an employee, not a service provider, no agreement — until a raise arrives and it has to be explained. 2. Options promised verbally and granted only after the valuation has risen — turning a benefit into a tax event. 3. Intellectual property created by an external contractor without a proper assignment of rights. All three surface in due diligence, at the worst possible moment to deal with them.

Section 102 — the thing least worth improvising

An employee option plan under section 102, capital gains track with a trustee, is the central tool for rewarding employees in a startup, and it is highly sensitive to detail: deposit with a trustee, a minimum holding period, and the timing of the grant relative to the company's valuation.

A plan that was not properly established, or a grant made at the wrong time, may push employees into the employment-income track — that is, marginal rates instead of 25%. That is the gap employees discover on exit day, and a conversation no founder wants to have.

← Read our full guide: employee options and section 102

Who accompanies you

The hi-tech practice at our firm is led by CPA Amir Gonen — former Head of the Tax Division at the Israel Innovation Authority, and before that a senior inspector in the international taxation unit at the Tax Authority and a senior manager in EY's international department.

Which means a company accompanied by us gets both the routine side — books, payroll, filings — and the perspective of someone who was on the side that grants the benefits and examines them.

← CPA Amir Gonen's profile

When to get in touch

The honest answer: earlier than you think. An hour's conversation before incorporating, before the first option grant or before signing a term sheet is worth more than any retrospective fix. Most of what is hard to repair later could have been arranged for almost nothing at the start.

The information on this page is general and does not constitute professional advice. The tax aspects depend on the company's structure, the identity of its shareholders and the circumstances of the transaction.

Incorporating, or heading into a raise?

Talk to us before the decisions — that is where most of the value is

Contact us now

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