2025 is has arrived! And with it, a super exciting topic in today's issue of The Founder Playbook... taxes.

Yes yes, I know. Taxes are boring and lame. But you know what's not boring and lame? Saving a ton of money on taxes. And if you're a founder based in the United States, there's a way that you could avoid paying federal taxes on your capital gains when you IPO or get acquired.

That's right, my friends. Today we dive into the wild world of QSBS.

QSBS (or "Qualified Small Business Stock") is a cost saving programing designed by the IRS to encourage investments in startups.

And yes, it's legal. Let's dive in.

QSBS 101

So what exactly is QSBS, and who benefits from it?

QSBS enables shareholders of a startup to avoid paying federal taxes when the startup goes through an exit event – meaning IPO or acquisition.

Here's how it works.

See, when you join a startup (as a founder, investor, or early employee) you are typically issued shares of the company. In some cases, you have to wait for the shares to vest. Othertimes they are given immediately. Sometimes you have to purchase your shares. Othertimes they are gifted.

(If you want to learn more about all of that, you may want to grab our fundraising guide, Raise Millions.)

Anyway. When the company exits, the shares become valuable. And when you sell your shares, the government (state and federal) will want to tax you on that income. But if you qualify for QSBS, you may be able to avoid paying taxes at the federal level. That could mean thousands, tens of thousands, or even hundreds of thousands of dollars saved... depending on the exit.

Yes, really.

And here's some more good news: If you're a U.S. startup, there's a good chance you qualify. The basic requirements are:

1. Your company is registered in the U.S. as a C-corp
2. Total assets are less than $50 million when your shares are issued
3. You hold the shares for at least 5 years before exiting

How to take advantage of QSBS

This feels like a good time to remind you all that I am not a lawyer or an accountant. However, there are lawyers and accountants out there who can help you navigate the QSBS waters.

For some of you, this may mean filing a particular form with the IRS. For others, it may mean a different path. The nuances of your shares will determine what you need to do to take advantage of QSBS.

But don't sleep on this. In some cases, you need to file your document with the IRS within 30 days of purchasing your shares. So talk to a lawyer or accountant ASAP.

Great, another thing I need to handle while I'm trying to, you know, actually build my company." - you, probably

I hear you. But trust me, it is so worth prioritizing this. When Hustle Fund GP Eric Bahn sold his startup, he didn't know about QSBS. And so he didn't file any paperwork. And he had to pay a ton of money to the federal government. Money he could have used to pay for his kids' school. Or buy a new pool. Or start a cult.

So here's your mission

1. Talk to a tax advisor ASAP. Seriously. Stop reading this article and do that now. They'll help you navigate the nuances of QSBS for your specific situation.
2. If they tell you to file a form right away, just do it. Trust me. Actually, trust them.
3. Educate your team and investors. Make sure everyone who might benefit from QSBS knows about it.

After all, you've worked hard to build something amazing. Don't let Uncle Sam take a bigger bite than he needs to.