QSBS qualification, stock option planning, and entity choice tuned for founders and early employees sitting on equity upside.
Technology companies create most of their value in equity, and equity is taxed by decisions made years before a liquidity event. Whether the company is a C corporation, when an 83(b) election was filed, whether the stock qualifies under section 1202 and how long it has been held decide whether a founder keeps the gain or sends a large share of it to the Treasury.
Operating decisions carry the same weight. Section 174 changed how software development costs are deducted. The research credit offsets payroll tax for early-stage companies and income tax later. Option grants, exercise timing and the alternative minimum tax interact in ways that a preparer sees only after the fact.
We map the cap table and the entity history, model the exit under the structures available, and write a plan that sequences the elections and the exercise dates with the documentation each one needs.
What we typically see: An 83(b) election never filed. QSBS eligibility assumed, never verified. Options exercised into an AMT bill. Development costs capitalized without a plan. An LLC that should have been a C corporation five years ago.
Each one is modeled against your numbers and written into the blueprint with the documentation it needs.
We had assumed the stock qualified. Checking the asset test two years before the sale was the difference between a taxable exit and an excluded one.
Stock in a domestic C corporation that met the gross asset and active business tests when issued and has been held more than five years. Gain on its sale can be excluded from federal tax up to the section 1202 limits.
Not while the company is taxed as a partnership. A conversion to a C corporation can start the clock, and whether it makes sense depends on the exit you expect and how far away it is.
Within 30 days of receiving restricted stock, when the value is low. Missing the window cannot be fixed later, which is why it is the first thing we check for every founder.
Development salaries and contractor costs must be capitalized and amortized rather than deducted immediately, which can create taxable income at a company that is losing cash. Planning the treatment and the credit together softens it.
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