As I’ve written about before, Congress has enacted a significant tax break. If you purchase qualified small business stock before the end of the year, and if you hold that stock for 5 years or more, you will be completely exempted from tax on the gain from the sale of the stock (subject to a very large cap). This exemption applies to the alternative minimum tax as well.
As a practical matter, what does this mean?
- If you are on the fence about starting your company this year or next, start it this year.
- Start your company as a C corporation, not an S corporation or LLC. S corporations and LLCs don’tqualify.
- Consult a tax advisor to make sure you qualify.
For another article on this, see this article.