But I knew nothing about taxes and left money on the table
Now that I'm running my second business, here are some personal finance things I now think about:
• QSBS - Ensure your company is set up for QSBS as this allows you, your employees and your investors to pay no taxes on $10M each when you sell your company.
• Your 83b Election - After you receive your equity, ensure you file an 83(b) election in the first 30 days and retain evidence of the submission. This could save millions in taxes!
• Vesting - Make everyone vest equity, and longer than you think you need to. Standard vesting in 4 years & that's not enough to build a great company. But allow people 10-years post employment to buy their options.
• Multiplying QSBS - Before raising a Series B, look into multiplying your QSBS exemption. QSBS is a $10M exemption per shareholder, but you can gift shares to family members or set up trusts to multiply it to $30, $40 or even $50M!
• Secondaries - As the company does better, you may be tempted to pay yourself a very high salary. Don't do that - smaller secondaries (selling 1%-5%) every time you raise money is much more tax-efficient.
• Exit Planning - Build the company like you're going to run it forever, otherwise you might just have to. Ironically, the best way to sell your business for a lot of money is to not be looking to sell your company.
With that said, the hardest part is actually building a company that ends up being worth something... so that's where you should spend most of your time (vs optimizing your personal finances)
Anything I'm missing? Leave a comment
And if you like this type of content, I'm teaching a free workshop later this month on Personal Finance for Startup Founders: https://lnkd.in/e-3-meRG
I'll send everyone who registers my free 2,500 word guide on optimizing QSBS!
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