There’s no mention of Qualified Small Business Stock, QSBS. If you are early on, this is more important than 83b or early exercise although more difficult to manage.
>proceeds of the original and the new investment are treated as long term capital gains [...] if the proceeds stay in a QSB for more than 5 years, the whole thing is tax free
Excellent point, Chris. Founders should consider giving out RSUs instead of options for this reason. My understanding is that stock options do not count as Qualified Small Business Stock, however.
You have to exercise that option first and then you have stock. That it is subject to a repurchase agreement (vesting) is a separate matter. QSBS is hard to achieve but the reward is much greater than 83b.
Basically formation needs to be engineered with QSBS in mind. And you have to be early, pre-$50M. And ....
What Is QSB Stock and Why Does It Matter for Startups? | https://news.ycombinator.com/item?id=15495873 (2017Oct;21comments) <- content is 2016Jul grellas
>When you do qualify, the benefit can be up to $2M
Ask HN: How do I minimize the taxes from selling my startup? | https://news.ycombinator.com/item?id=2502623 (2011May;52comments)
>proceeds of the original and the new investment are treated as long term capital gains [...] if the proceeds stay in a QSB for more than 5 years, the whole thing is tax free
Tell HN: 100% exemption for angel investors extended through 2011 | https://news.ycombinator.com/item?id=2018041 (2010Dec;16comments)
>grellas: My two cents ...