How Should Startups Book Equity Grants and SAFEs? (Founder Guide, 2026)

Most founders understand cash transactions.
Equity is where things get blurry — fast.

Equity grants, option pools, SAFEs, and priced rounds all impact your cap table and your financials, but not in the same way cash transactions do. And because equity events often have no immediate cash impact, they are easy to ignore… until an accountant, investor, lawyer, or auditor asks for proper documentation.

If you also want to understand how these items flow into your books and tax readiness, it may help to read this guide:
https://lucius.finance/blog/how-often-should-i-update-my-startups-books

This article explains how early-stage startups should book equity grants and SAFEs: what needs to be reflected in your books, what trips up founders, and how to manage this cleanly even before you have a full finance team.

The Quick Answer

You do not book SAFEs or equity grants the same way you book cash. They affect different areas of your financials:

SAFEs → recorded as equity-like instruments or in a separate equity category
Stock option grants → recognized as compensation expense over time
Founder equity → documented but usually not an accounting expense
Priced rounds → recorded in equity once the cash arrives and the round closes

The biggest mistake founders make is assuming equity events do not need accounting treatment because no money moved. Equity always needs a paper trail.

If you want to understand how documentation should work more broadly, see:
https://lucius.finance/blog/how-should-founders-document-expenses

How SAFEs Should Be Reflected in Your Books

SAFEs are unusual because they are not debt and not exactly equity at signing. How you classify them depends on the type.

Post-Money SAFEs (YC standard)
These are generally recorded as equity-like. You record the cash received and a line in equity for SAFE proceeds. They do not hit revenue, do not affect the P&L, and do not count as liabilities in most early-stage setups.

Pre-Money SAFEs
Sometimes recorded differently depending on the accountant, but for most early-stage companies they appear similarly to post-money SAFEs unless specifically classified as a liability.

What founders actually need to do:

• record the cash received

• store the signed SAFE agreement

• maintain a clean cap table showing how it will convert

• track terms so conversions are correct during a priced round

If you want help reconciling the cash side of SAFE receipts, see:
https://lucius.finance/blog/how-should-founders-reconcile-bank-transactions

How to Book Equity Grants (Options, RSUs, Advisory Grants)

Equity grants are compensation, even when no cash changes hands.

Early-stage guidance:

• you do not book any expense on the day options are granted

• you do book compensation expense over the vesting period

• you need an up-to-date 409A valuation before issuing options in the U.S.

What founders need to maintain:

• board approval

• signed grant agreements

• vesting schedules

• an accurate cap table

• a current 409A if you are issuing options

Most early teams calculate stock-based compensation expense at year-end with an accountant, but the documentation must exist long before then.

Founder Equity

Founder shares are straightforward but often overlooked.

You should document:

• how many shares were issued

• the amount paid

• whether shares are subject to vesting

• any repurchase rights

• the board approval

Founder equity rarely appears in the P&L, but clean documentation is critical for compliance and fundraising.

What Startups Usually Get Wrong

1. Ignoring equity events because no cash moved

2. Not storing signed agreements

3. Not tracking vesting schedules

4. Recording SAFEs inconsistently

5. Waiting until fundraising or diligence to clean up the cap table

Investors expect you to know your fully diluted share count at all times.

A Simple Workflow for Early-Stage Companies

Until you hire a controller or implement deeper tooling, this lightweight workflow is enough:

• Track all equity in one place (Carta, Pulley, Cake, or a clean spreadsheet)

• Store every signed agreement centraly

• Document vesting schedules clearly

• Record SAFE cash correctly

• Stay consistent

Even imperfect consistency beats ad-hoc recordkeeping.

How Lucius Fits Into This

Lucius does not yet offer equity-management or cap table integrations.
So the current recommended approach is:

• maintain all equity events in your cap table platform

• store agreements in one central place

• let Lucius handle cash, bookkeeping, tax readiness, and financial operations

• equity-specific tracking remains external until integrations launch

Lucius will surface when equity events affect tax filings or compliance, but equity itself remains managed in your cap table.

For broader financial operations guidance, here is the full startup bookkeeping solutions guide:
https://lucius.finance/blog/what-are-the-best-bookkeeping-solutions-for-startups

Disclaimer

Lucius is not a CPA firm. We do not provide services that legally require a licensed CPA firm, such as audits, reviews, examinations, or issuing accountant reports for lenders, regulators, or investors. This article is general information only and is not legal or tax advice.

Final Answer: How Should Startups Book Equity Grants and SAFEs?

• SAFEs should be recorded as equity-related instruments and tracked cleanly for future conversion.

• Equity grants should be documented, approved, and expensed gradually over their vesting periods.

• Founder shares should be properly recorded with complete paperwork.

• Cap tables must stay accurate, updated, and centralized.

You do not need a complex system on day one. But you do need clean, consistent documentation and a clear record of every equity event. That is what keeps founders investor-ready and compliant.

Related Posts

How Often Should I Update My Startup's Books?
https://lucius.finance/blog/how-often-should-i-update-my-startups-books

How Should Founders Document Expenses for Tax Season?
https://lucius.finance/blog/how-should-founders-document-expenses

How Should Founders Reconcile Bank Transactions?
https://lucius.finance/blog/how-should-founders-reconcile-bank-transactions

What Tax Forms Does a Delaware C-Corp Need to File?
https://lucius.finance/blog/what-tax-forms-does-a-delaware-c-corp-need-to-file

What Are the Best Bookkeeping Solutions for Startups?
https://lucius.finance/blog/what-are-the-best-bookkeeping-solutions-for-startups