In preparing for a financing round, most of the focus lands on deal terms, valuations, and investor outreach. But one of the most powerful long-term tax advantages is often overlooked: Qualified Small Business Stock (QSBS) treatment.
To help founders, investors, and advisors navigate QSBS during financings, QSBSExpert.com and SeedLegals partnered to explore 5 key areas of focus.
Top 5 QSBS Items in Preparation of Your Financing Round
Whether you’re raising on a SAFE, priced equity round, or planning to convert your LLC to a C-Corp, this piece outlines what you need to know about QSBS eligibility before you take on new capital. If planned right, QSBS can enable early shareholders to exclude up to 100% of capital gains from federal taxes after five years — a massive opportunity that most do not want to miss.
SeedLegals Makes Funding Rounds Seamless
SeedLegals is one of the most innovative platforms in startup legal tech today. They help founders close funding rounds faster and more affordably by automating everything from term sheets and cap tables to employment agreements and NDAs.
With thousands of startups using their platform across the UK, Europe, and now the US, SeedLegals, together with QSBSExpert and CapGains, makes it easy to:
- Raise money via SAFEs, priced rounds, or agile top-ups
- Build and manage your legal stack on a tighter budget
- Ensure you’re not accidentally jeopardizing your QSBS eligibility during a raise
Their platform is designed to both efficiently prepare the financing documents and their legal team assists with the process. The efficiencies in SeedLegals process makes it appealing to consider a priced round in place of a SAFE round, which may be especially helpful in ensuring that an investor’s holding period starts upon the new securities being issued.
Next Steps
We’re excited to share our insights with SeedLegals users and the wider startup ecosystem. If you’re planning a raise or advising a company that is, make sure you check out the full article and contact us to help analyze if QSBS may apply in your situation.
Top 5 QSBS Items in Preparation of Your Financing Round
The earlier you factor in QSBS planning, the more you and your investors stand to gain.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.