Optimal transition planning

The importance of your company ownership structure

The CEO of an early-stage technology company came to us with questions about his tax exposure pending an upcoming large and pivotal financing round. He wanted to think through selling only those shares that would net him a certain amount of post-tax proceeds. Through our conversation with him and his professional advisors, we were able to identify that his equity would fall under Qualified Small Business Stock (QSBS) guidelines, which meant that on the first $10 million of gain from the sale, his federal capital gains rate would be a fraction of the normal rate.

In addition, because of the way the transaction was structured, part of it would be considered ordinary income versus long-term capital gains. Working with his other professional advisors, we were able to structure the deal in a way that still allowed the CEO to reach his desired post-tax number, saving him millions of dollars in the process.

It’s important to remember that QSBS presents both opportunities and complexities. It takes an integrated team of seasoned experts to recognize all of the interconnected issues and how to work through them.

Interested to explore how you might benefit from an equity ownership analysis?

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