How to avoid paying federal taxes – legally

🥳 Hustle Fund is coming to Miami

Exciting news, founders. Hustle Fund’s Elizabeth Yin is heading to Miami next week for our first event of the year: Founder Friends.

This is going to be an insanely cool event. Why? Because Elizabeth is interviewing founder, investor, and media producer Lisa Muccio. Lisa is the co-founder of The Pitch podcast, and GP at The Pitch Fund. In addition to being a dynamic storyteller (truly, one of the best), she also has an epic story.

She and her husband started The Pitch as a passion project. Then it sold to Gimlet. Then Gimlet sold to Spotify. Then Lisa and Josh got the podcast back from Spotify. And now it’s in its 12th season with over 10 million downloads.

Oh, and they launched a fund (NBD). OH and also Lisa has screened literally thousands of startups pitches and is super good at spotting breakout founders.

Anyway, it’s gonna be epic. No charge to attend, just reserve your spot.

👶 It takes a village to raise a startup

Startups are nothing without a strong, supportive community behind them, pushing them to the finish line.

Founders understand this, as no single founder can raise the capital needed, complete all of the necessary work and see their idea through to fruition without supportive friends, family and colleagues.

Singapore Global Network (SGN) understands this, too.

As a division under Singapore’s Economic Development Board, SGN broadens and deepens Singapore’s networks of family, friends, and fans by building meaningful and lasting professional relationships across the globe.

Whether you are Singaporean, a friend who has worked or lived in Singapore or simply interested in discovering the vibrant opportunities the “Lion City” has to offer, SGN invites you to check out its 130,000-strong (and growing) network of global professionals, founders and friends.

Join SGN today.

*this is sponsored.

📰 Today's Edition

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 a Delaware C corp

2. Total assets are less than $50 million when you formed (including your seed round)

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 and your role in the company is going to 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.

Mission accepted,

Kera from Hustle Fund

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