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Founder's Journal
How to Maximize The Value of Your Startup Equity
Nov 15, 2023
Ankur Nagpal, startup equity expert, shares strategies for maximizing the value of your startup equity. They discuss QSBS, Charitable Remainder Trusts, and the impact of co-founders on equity value.
20:06
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Quick takeaways
- Understanding the benefits of Qualified Small Business Stock (QSBS) can greatly impact the value of a founder's equity by providing a tax exemption on up to $10 million in gains when selling shares.
- Optimizing QSBS benefits through strategies such as QSBS stacking and setting up trusts can further increase the value of a founder's equity, as long as these tactics are within legal boundaries and not seen as abusing the tax system.
Deep dives
Understanding QSBS and its Benefits for Startup Founders
One of the most important aspects of maximizing startup equity is understanding the benefits of Qualified Small Business Stock (QSBS). QSBS provides a tax exemption that allows founders to pay no federal taxes on up to $10 million in gains when they sell their shares. Additionally, in certain states like New York, no state taxes are required. This generous tax break can make a significant difference in the value of a founder's equity. To qualify for QSBS, the company must be structured as a C corporation. Founders should be cautious not to accidentally mess up their QSBS status, which can occur by not properly structuring the company or conducting a large buyback of shares. Taking advantage of QSBS can highly impact the overall value of a founder's equity and should be considered early on.
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