Smart Tax Planning for Entrepreneurs and Startups

Chosen theme: Tax Planning for Entrepreneurs and Startups. Build a confident financial foundation from day one with practical strategies, relatable founder stories, and simple, high-impact steps you can put to work before your next tax deadline.

Entity Choice: Build a Tax-Savvy Foundation

S corporations can reduce self-employment taxes by splitting income between salary and distributions, but the salary must be reasonable based on industry standards. Plan payroll early, document your rationale, and revisit annually. Share your compensation approach in the comments to help others benchmark thoughtfully and avoid costly surprises.

C corporations often fit venture-backed startups and can unlock Qualified Small Business Stock (QSBS) benefits, potentially excluding up to $10 million of gain if requirements are met. Keep detailed records from formation, track gross assets thresholds, and confirm active business eligibility. Subscribe for a checklist to keep QSBS on track from day one.

LLCs offer straightforward setup, pass-through taxation, and flexible ownership structures—great for testing early traction. As profits grow, consider electing S corporation status or converting to a C corporation for investors. Ask your questions below about timing conversions, and we’ll address common pitfalls in our next newsletter.

Founder Equity, 83(b), and Early Paperwork Wins

If you receive restricted stock, filing an 83(b) election within 30 days can shift taxation to today’s low value, potentially converting future appreciation into capital gains. Miss the window, and taxes may hit at vesting. Comment if you want our filing reminder template and checklist for founders.

Deductions, Credits, and Timing That Protect Cash

Expensing equipment under Section 179 or using bonus depreciation accelerates deductions, but cash flow and income projections matter. Bonus percentages are phasing down, so modeling multiple scenarios pays off. Comment with your biggest equipment outlay and we’ll respond with timing considerations to discuss with your advisor.

Deductions, Credits, and Timing That Protect Cash

Eligible research costs can generate a federal R&D credit, and certain startups can apply it against payroll tax up to a higher annual cap under recent updates. Track qualified wages and contractor work contemporaneously. Subscribe for our experiment diary template to document eligibility the right way.

Quarterly Estimates: Dates That Guard Your Runway

Mark estimated tax due dates—often mid-April, mid-June, mid-September, and mid-January—to avoid penalties. Use a rolling forecast to set aside cash monthly. Share how you budget estimates, and we’ll feature practical methods other founders actually stick with.

Safe Harbor Strategies for Predictability

Safe harbor rules can reduce penalty risk by paying a set percentage of last year’s tax or this year’s expected amount. Coordinate with your bookkeeper to refresh projections quarterly. Subscribe for our worksheet that turns messy spreadsheets into simple, decision-ready snapshots.

Cash vs. Accrual: Pick What Tells the Truth

Cash basis keeps things simple early, but accrual can reveal true margins and burn trajectory. Choose the method that matches your business model and investor reporting. Comment with your revenue pattern, and we’ll suggest which approach tends to clarify decisions for similar companies.

Hiring, Payroll, and the Contractor Question

If you elect S corporation status, paying yourself a reasonable salary matters. Benchmark roles and regions, document duties, and adjust as responsibilities change. Ask for our salary memo template in the comments, and we’ll share a founder-friendly outline you can tailor.

Economic Nexus After Wayfair

You may owe sales tax in states where you exceed transaction or revenue thresholds, even without a physical presence. Track by state, automate filings, and revisit thresholds quarterly. Comment with your top three states, and we will share typical triggers founders watch closely.

Franchise Taxes and Local Fees

States with franchise or minimum taxes can bite early-stage companies despite low profits. Forecast these fixed costs and set reminders for annual filings. Subscribe to receive a simple calendar that flags common state deadlines many founders overlook.

Exits, Losses, and Long-Game Tax Strategy

Holding qualified C corporation shares for at least five years can unlock significant QSBS exclusions if rules are met. Track stock issuances, gross assets, and business activity carefully. Subscribe for our QSBS tracker template to keep everything audit-ready.

Exits, Losses, and Long-Game Tax Strategy

Post-2017 federal NOLs generally carry forward indefinitely but may offset only a portion of taxable income each year. Keep accurate schedules and reconcile annually. Comment if you want a sample tracking sheet that investors actually appreciate during diligence.