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Is Your Startup Stock QSBS Eligible? The Founder’s Tax-Saving Checklist
- Startup founders can save significantly on federal taxes through Qualified Small Business Stock (QSBS) exclusion.
- QSBS allows for up to 100% exclusion of capital gains on qualified stock sales, benefiting C-corporation shareholders.
- Founders may overlook the tax-saving potential of QSBS and lose eligibility with preventable errors.
- Criteria include being a U.S. C-Corp, acquiring stock at issuance, a five-year holding period, and <$50M gross assets.
- Eligible businesses include tech, biotech, manufacturing, while service-based firms are excluded.
- Founders must monitor ongoing eligibility amidst structural changes, business pivots, and financing rounds.
- Preserving QSBS status involves meticulous documentation, consulting advisors, and strategic tax planning.
- Founders are advised to assess QSBS qualification early to optimize tax benefits and avoid missed opportunities.
- Understanding and leveraging QSBS can lead to substantial tax savings for startup founders and early employees.
- Consulting legal and financial advisors is crucial to navigating QSBS eligibility and maximizing tax incentives.
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