companies require supplies and equipment to get into business. A T-shirt
company needs printing presses and dryers. A hamburger stand needs a grill and
spatulas. A tech company needs computers. A zoo needs cages and at least a
couple of nice llamas.
If these things are purchased for the company and the person who
purchased them was not reimbursed from the company account, the fair market
value would be the price they paid.
Slices = Price Paid x Cash Multiplier
However, in many cases, people may have equipment that they
acquired some other way. Someone may keep llamas as pets, for example, and
provide some for the start-up zoo. Or perhaps someone has an old truck that the
startup can use for deliveries. Transferring ownership of a pre-owned asset into a company isn’t the same as spending
cash. It’s a non-cash contribution. Therefore, it represents a different level
of risk and slices are at the non-cash rate. If the supplies or equipment is less than a year old, the model uses the
Slices = Price Paid x Non-Cash Multiplier
If the supplies or equipment is more than a year old, the model uses the resale price. You can find
the current resale price fairly easily by looking on eBay.com, Craigslist, or
industry classified listing for similar supplies or equipment.
Slices = Resale Price x Non-Cash Multiplier
It’s important to note that when slices are received, the
supplies and equipment becomes the property of the company. This means that if
the person who contributed the equipment leaves the company, they can’t take
the stuff with them. The company owns it.
In many cases, personal laptops or cellphones used in building
the company would not be treated as contributed equipment and people who own
them would not receive slices. The company, therefore, would not own these
items and departing employees could take them when they leave.
Similarly, small amounts of supplies brought from home may not warrant
slices. Use your best judgment, a person probably doesn’t deserve slices for
bringing a tape dispenser and some old pens to the office.
Cash contributions or tangible contributions will have special
treatment in the event of separation, which I will cover in detail in the
chapter about recovery.