Accounting for start-ups with investors – what has to be handled?
Share issues and convertible instruments have to be classified as debt or equity on the terms of the agreement, not on what they are called. Options to employees are taxed as salary under the ordinary rules, but the start-up option scheme can defer the tax until the shares are sold. And a convertible loan is not a share – a gain on selling one before conversion is not automatically covered by the participation exemption.
Share issues and paid-in capital
In a share issue, the share capital and the share premium have to be separated, and the tax-paid-in capital documented per share. This is not bookkeeping pedantry. Paid-in capital can later be repaid without dividend tax, and the position follows each share – not the balance sheet as a whole. If that documentation is lost through several funding rounds, real value disappears for the shareholders. See Share issues in a limited company and Dividends from your own AS
Convertible loans and SLIP
SLIP is a Norwegian SAFE-like instrument used in the early phase where the parties want capital now but to defer the final valuation. SLIP is not a separate company law category with one fixed accounting treatment. The agreement's terms on repayment, priority and future shares decide whether the instrument is treated as debt or equity. Converting debt requires among other things a statement and auditor confirmation – see Contributions in kind
The holding trap: a convertible loan is not a share
This is the most expensive mistake in this area. A Norwegian holding company can normally sell qualifying shares tax-free under the participation exemption. But a convertible loan is not a share until it is converted. A gain on selling a convertible bond before conversion is therefore not automatically covered by the exemption. That is the same issue the Supreme Court dealt with in the REC judgment – see The participation exemption Where the instrument is to be sold, settle the conversion question first.
Loans from personal investors
Personal lenders can be caught by the rule on extra tax on interest above the shielding level under section 5-22 of the Taxation Act. The shielding rate is set every two months, so a high rate on a «founder-adjacent» loan should not be fixed without considering this rule – see Loans from your own company
Ordinary employee options
Under the ordinary rules the grant normally triggers no tax. When the option is exercised, the difference between market value and the exercise price is normally taxed as salary – with withholding, the a-melding and employer's contributions for the company. That can be a significant cash burden at a point when the employee has sold nothing. The company at the same time takes on employer obligations it has to have money for – see A monthly checklist for the payroll run
The start-up option scheme
Where all the conditions are met: no tax on grant, no tax on exercise, no ordinary salary taxation of the option benefit – and tax only when the shares are later sold. But note how the exit is taxed: under the shareholder model, not at the ordinary 22%. In 2026 the effective rate on a share gain is 37.84% before shielding – see The shielding deduction The scheme therefore defers the tax and removes the salary taxation; it does not make the gain tax-free.
The conditions of the scheme
The scheme was expanded from 13 March 2025. Among the main conditions: The company can be up to 12 years old, have up to 150 full-time equivalents, operating income up to NOK 80 million and a balance sheet total up to NOK 200 million. The employee normally has to work at least 25 hours a week and cannot control more than 5% of the shares or votes. The option is exercised at the earliest after 3 and at the latest after 10 years, and the underlying share value is capped at NOK 3 million per employee and NOK 60 million at company or group level. The valuation at grant is critical, because the exercise price has to be at least the market value under the scheme's rules. Set it too low and the whole scheme can fall away – see What is my business worth? Grants and exercises under the scheme have their own third-party reporting, with an ordinary deadline of 1 February in the year after the income year.
Employees buying shares
Where the employee buys shares at real market value, no employment benefit normally arises on the purchase. An under-price because the person is an employee can by contrast be taxed as salary – see Benefits in kind Older models where the company lends the employee money for the purchase should not be used as a standard recipe. Section 8-10 of the Companies Act and the rules on loans to personal shareholders have to be considered first.
The investor deduction and SkatteFUNN
The investor deduction can give personal investors relief on investing in a qualifying start-up. The conditions relate to the company's size, age and activity, and to the investor's role. The scheme has to be assessed before the issue is carried out – it cannot be established afterwards. SkatteFUNN gives tax relief for costs on approved research and development projects. The project has to be approved, and the costs documented at project level with timesheets. The accounts should therefore be set up with a project dimension from the start – not reconstructed when the application is due.
What the accounts have to survive before a due diligence
An investor goes through the share register, the issue history, the paid-in capital, the option agreements, the convertible instruments, the shareholders' agreement and the tax positions. Whatever was not documented along the way becomes a risk reduction in the price – or a condition in the agreement. See Due diligence when selling a business and The shareholders' agreement
Common mistakes
Paid-in capital is not documented per share through the funding rounds. SLIP and convertible loans are classified by name instead of by the agreement's terms. A convertible loan is sold in the belief that the participation exemption applies. Options are exercised without the company having planned for the employer's contributions. Start-up options are granted with too low an exercise price. The investor deduction is considered after the issue has completed. SkatteFUNN costs cannot be documented at project level. Greenleaf can handle issue accounting, paid-in capital, option reporting, SkatteFUNN documentation and shareholder reporting for start-ups. The company law documents and the option agreements should be drafted by a lawyer.
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This is general guidance, not advice on your specific case. Deadlines, rates and amounts change – always check the current rules, or get in touch with us.
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