Startup Terms Glossary
What is a Parachute Payment?
If a change in ownership occurs in a startup, the startup will often make parachute payments to existing members of executive management. These payments are similar to severance packages since they generally provide a large lump sum payment to business executives upon their termination. The IRS limits the amount of parachute payments that can be made before an excise tax is levied against a startup.
Parachute Payment Examples
Key factors of parachute payments include:
- Example 1. Paid to high-earning members of management
- Example 2. Regulated by the IRS
- Example 3. Change in management required
This web page also discusses the parachute payments and excise taxes.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
Meet some of our Startup Lawyers
Agnes M.
Agnes Mombrun Geter is the Founder and Managing Attorney of Mombrun Law, PLLC. She is an experienced attorney and is a member of the Florida Bar, New Jersey Bar, and the Pennsylvania Bar. The firm's practice focuses on Estate Planning, Business Law, and Debt Settlement including IRS Debt Relief. The firm's goal is to simplify the law and provide clients with the confidence and information necessary to make their decisions. The firm also provides project-based legal services to other attorneys and law firms, along with assisting as personal counsel and local counsel on legal matters.
"Ma. Agnes was very kind and thorough. I highly recommend her and would hire her again if needed."
Richard P.
Have over 40+ years of corporate and commercial law experience.
"The process was easy, hassle-free at high quality. Thank you!"
Julian H.
I am a business attorney with years of experience advising individual entrepreneurs and small businesses on issues ranging from entity selection/formation to employment law compliance, to intellectual property protection and exploitation. I often act as General Counsel for my clients fulfilling the legal function as part of a team of managers. I look forward to learning more about your business and how I may be of assistance.
"Julian was stellar - speedy and informative. Will absolutely hire him for future projects."
Christopher R.
Corporate and transactional attorney in sixth year of practice. Focus areas include general corporate counsel, labor and employment law, business partnership matters, securities matters related to privately-held companies, and regulatory compliance in securities and finance matters.
"Christopher has been incredibly helpful with our ongoing project!"
Forest H.
Forest is a general practice lawyer. He provides legal advice regarding small business law, contracts, estates and trusts, administrative law, corporate governance and compliance. Forest practiced complex commercial litigation in Florida for eight years, representing clients such as Host Marriott, Kellogg School of Business, and Toyota. Since moving to Nashville in 2005, he has provided legal advice to clients forming new businesses, planning for the future, and seeking funding through the use of equity and/or debt in their businesses. This advice has included the selection of business type, assistance in drafting and editing their business plans and offering material, reviewing proposed term sheets, and conducting due diligence. Forest is a member of the Florida, Tennessee, and Texas Bars; in addition. Forest has held a Series 7, General Securities Representative Exam, Series 24, General Securities Principal, and Series 63, Uniform Securities Agent State Law.
"I had a great experience working with Forest Hamilton during the acquisition process. Forest was professional, responsive, and easy to work with throughout the APA drafting and review process. Communication was clear, revisions were handled quickly, and he helped keep the transaction moving smoothly from start to finish. I appreciated his professionalism and willingness to answer questions throughout the process. Would definitely recommend him to others needing support with business acquisition agreements and transaction-related legal work. Thanks again, Forest."
Anjali S.
Attorney licensed in California, New York, and Florida with over a decade of experience in technology transactions, data privacy, and intellectual property. I advise businesses on drafting, reviewing, and negotiating commercial agreements, including SaaS agreements, master services agreements (MSAs), vendor and procurement contracts, data processing agreements (DPAs), and intellectual property licensing arrangements. I hold the CIPP/US and CIPP/E privacy certifications and regularly support clients on matters involving data use, privacy considerations, and contract structuring in technology-driven business relationships. My approach is practical and business-focused, with an emphasis on clear guidance, efficient negotiation, and helping clients move forward with confidence.
"Anjali is beyond sharp, responsive, and--most importantly for my project--highly knowledgable in the entertainment and intellectual property spaces. I'd work with her again in a second."
Find the best lawyer for your project
Browse Lawyers Now
Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.
View Trustpilot ReviewStartup lawyers by city
- Atlanta Startup Lawyers
- Austin Startup Lawyers
- Boston Startup Lawyers
- Chicago Startup Lawyers
- Dallas Startup Lawyers
- Denver Startup Lawyers
- Fort Lauderdale Startup Lawyers
- Houston Startup Lawyers
- Las Vegas Startup Lawyers
- Los Angeles Startup Lawyers
Contracts Counsel was incredibly helpful and easy to use. I submitted a project for a lawyer's help within a day I had received over 6 proposals from qualified lawyers. I submitted a bid that works best for my business and we went forward with the project.
View Trustpilot Review
I never knew how difficult it was to obtain representation or a lawyer, and ContractsCounsel was EXACTLY the type of service I was hoping for when I was in a pinch. Working with their service was efficient, effective and made me feel in control. Thank you so much and should I ever need attorney services down the road, I'll certainly be a repeat customer.
View Trustpilot Review
I got 5 bids within 24h of posting my project. I choose the person who provided the most detailed and relevant intro letter, highlighting their experience relevant to my project. I am very satisfied with the outcome and quality of the two agreements that were produced, they actually far exceed my expectations.
View Trustpilot Review