How to build or invest in a startup without paying capital gains tax
0Reported today on TechCrunch
For the full article visit: https://techcrunch.com/2019/12/04/how-to-build-or-invest-in-a-startup-without-paying-capital-gains-tax/
How to build or invest in a startup without paying capital gains tax
Peyton Carr
Contributor
Share on Twitter
Peyton Carr is a Financial Adviser to founders, entrepreneurs and their families, helping them with planning and investing. He is a Managing Director of Keystone Global Partners.
More posts by this contributor
Make a personal plan for your exit or IPO
Founders, entrepreneurs, and tech executives in the know realize they may be able to avoid paying tax on all or part of the gain from the sale of stock in their companies - assuming they qualify.
If you're a founder who's interested in exploring this opportunity, put careful consideration put into the formation, operation and selling of your company.
Qualified Small Business Stock (QSBS) presents a significant tax savings opportunity for people who create and invest in small businesses. It allows you to potentially exclude up to $10 million, or 10 times your tax basis, whichever is greater, from taxation. For example, if you invested $2 million in QSBS in 2012, and sell that stock after five years for $20 million (10x basis) you could pay zero federal capital gains tax on that gain.
What is QSBS, and why is it important?
These tax savings can be so significant, that it's one of a handful of high-priority items we'll first discuss, when working with a founder or tech executive client. Surprisingly, most people in general either:
Know a few basics about QSBS;
Know they may have it, but don't explore ways to leverage or protect it;
Don't know about it at all.
Founders who are scaling their companies usually have a lot on their minds, and tax savings and personal finance usually falls to the bo