If you're starting or buying a business. Remember these four letters.

QSBS

This stands for Qualified Small Business Stock, and you can save millions in taxes if you do it right. You get up to 10M-500M in tax-free gains.

I've used this before and here is why I love it👇

#1: If you sell your business, you get 10M in tax-free gain or 10x your basis, up to 50M.

So if you put in 5M, you can get 50M tax free....

#1-continued

Needs to be in a C-Corp

Needs to be newly issued stock....so you can't just buy someone's shares.

So, if you wanted to buy a 5M EBITDA business and distribute the cash to you..you can't unless you pay double taxes (dividends).

You have to own for 5 years.

#1-continued

It can't be in real estate, or it can't be professional service businesses...example if you're a doctor, it can't be for your doctor office.

#1-continued

The initial enterprise's EV should be less than 50M., hence if you invested 40M into something and the EV is less than 50M, you can get up to 400M in tax-free gains.

#2

One of the knocks on this is having to sell after 5 years or you don't get the QSBS treatment. But there is a loophole.

You can roll proceeds into another QSBS stock, within I think 6 months and keep the QSBS treatment.

So, if you sell at 2 years, just roll it

#3

I like having a C corp structure as it forces you to retain earnings and grow the business. Often owners see the cash and want to take it out. If your going to go big, you need to retain earnings.

I'm okay with a modest salary and retaining the earnings..forced here

#4

The last reason is that if you have investors, they will love this. They love when you structure this way and get tax free gains. Its a great way to compound wealth.

We often go the QSBS route if we want to retain earnings to grow & if we want to distribute cash, go LLC

Lastly, this is just advice and I'm not an expert. Talk to your advisors

***Don't expect your experts to know this stuff however*** tell them you want this structure and make sure the boxes are filled out right.

That's a wrap!

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