![]() ![]() If you have questions on eligibility, we recommend speaking with your tax advisor. We can’t guarantee that any investments made on Wefunder will qualify for QSBS. The investor is not a corporation, acquires the stock at its original issuance (ie., not a secondary purchase), and holds the stock for at least 5 years At least 80% of the company's assets must be used in operating a "qualified trade or business," which excludes: personal services banking, insurance, financing, leasing, or investing farming mining or operating a hotel, motel, or restaurant The company is a US C-Corp with less than $50M in gross assets at the time the stock is issued (including the money raised in the financing) The QSBS tax exemption has a variety of requirements, including: In theory, you should be able to claim the Qualified Small Business Stock (QSBS) tax exemption on the investments made on Wefunder the same way you could for any early-stage business that meets the requirements of Section 1202 of the tax code. ![]() For instance, a brewery might share 80% of its profits until the investors are repaid, and then 20% thereafter in perpetuity. A common scenario is also to "swap" the dividend after your investment is repaid. Some might offer a percentage of profits. Some might offer a fixed dividend per share per year. While a tech startup almost never offers dividends, a later-stage local business - such as a brewery opening a second location - often will. If the company is successful, the value of the stock can increase with each subsequent round of financing, until the company is acquired or goes public. Like the stock market, you are buying equity at a fixed price per share (or unit for LLCs). When a startup is at a stage where they can afford to pay lawyers tens of thousands of dollars, they will do a "priced round". At this point, you are a shareholder owning equity, and you earn a return if the value of that stock goes up over time, and you are able to sell it. These will convert your investment to stock at a later date if the company raises a "priced round" from major investors, most often venture capitalists. Most early-stage technology startups use a Convertible Note or Simple Agreement for Future Equity. The faster the business grows revenue, the faster you earn a return, and the higher your effective interest rate. Unlike a loan, a revenue share returns a fixed amount of money (such as 2X your investment), but the time it takes to repay depends on how well the business does. ![]() A simple loan, just like your car loan, has a fixed repayment schedule known in advance. Some local businesses offer a simple loan or revenue share. The amount you may earn depends on the type of investment contract the company is offering. ![]()
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