Most founders treat a financing as a corporate deal, but it has tax consequences too. We review the instruments and terms in your round for effects on QSBS, net operating losses, foreign investors and founder equity. Our input reaches the deal team while terms can still change.
At a glance
- Practice
- Tax
- Pricing
- Flat fee, quoted before we start
- Included
- 6 deliverables
- Process
- 3 steps, one named attorney
- Where we work
- Slack, email or a call
When founders call us
The moments that usually bring a company to us for this work.
- 01
You are raising on SAFEs or convertible notes and want to understand the tax treatment
- 02
Your priced round includes a foreign investor or a fund with tax-driven side letter requests
- 03
A venture lender wants warrants as part of a debt facility
- 04
The round will change ownership enough that loss carryforwards may be limited
What you get
Scoped in writing before we start. One flat fee for all of it.
- Tax review of SAFE, convertible note or priced round documents
- QSBS impact analysis, including gross-asset test timing around the closing
- Review of investor tax requests in side letters and term sheets
- Analysis of warrants and other terms in venture debt facilities
- Section 382 ownership change considerations for net operating losses
- Notes for your accountant on reporting the transaction
How it works
- 1
Deal review
We read the term sheet, draft documents and cap table to see what the round changes.
- 2
Tax comments
We give the deal team written comments and suggested changes before signing.
- 3
Closing support
We confirm the final documents reflect the agreed tax positions.
Mistakes we help you avoid
The ones we see most often, and catch before they cost you.
- Avoided
Closing a large round in a way that puts later stock issuances above the QSBS gross-asset ceiling
- Avoided
Agreeing to investor tax covenants the company cannot practically comply with
- Avoided
Overlooking withholding or reporting obligations involving foreign investors
- Avoided
Treating a SAFE's tax character as settled when the answer depends on its terms
Tax for Financings: questions founders ask
There is no specific IRS guidance, and treatment depends on the SAFE's terms. Many advisors treat a standard post-money SAFE as equity-like rather than debt, so the company does not take income on receiving the money. Your accountant and counsel should agree on a consistent position.
This is unsettled. Some practitioners take the position that the holding period starts when the SAFE is issued, while others start it only when stock is issued on conversion. The answer can depend on the SAFE's terms, so it is worth reviewing before a sale.
It can. Under Section 382, if ownership by certain shareholders shifts by more than 50 percentage points over a testing period, the use of existing losses can be limited each year after. Several rounds can add up to an ownership change, so it is worth tracking.
Generally yes. Convertible notes are usually treated as debt, so interest may accrue and have tax consequences for both sides. Conversion into stock is typically not a taxable event for the holder, but details depend on the terms.
Get a flat-fee quote for Tax for Financings.
A short call with an attorney. You leave with a written scope and one fixed price.
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