Founders spend months perfecting a pitch deck and minutes on the tax decisions around a raise. Yet some of those decisions, like a form with a strict 30-day deadline, can be worth more than the round itself when the company is eventually sold. Here's what to get right, and when.
Before the raise
Choose the right entity. Most venture investors expect a C corporation, often a Delaware corporation. If you started as an LLC, converting before you raise is usually simpler than converting during a deal.
File your 83(b) election on time. If your founder stock vests over time, an 83(b) election lets you pay tax based on the stock's value when you receive it, usually very low, instead of as it vests, when it may be worth much more. It must be filed with the IRS within 30 days of the grant. There's no extension, and missing it is one of the most costly early mistakes a founder can make.
Protect your QSBS eligibility. Qualified small business stock can let shareholders exclude much or all of their gain when they sell. For stock issued after July 4, 2025, the company's gross assets must be $75 million or less when the stock is issued. Holders can exclude 50% of the gain after three years, 75% after four, and 100% after five, up to a $15 million limit or ten times their basis, whichever is greater. Keeping records of when stock was issued and what the company held at the time makes this much easier to prove later.
Clean up the books and the cap table. Investors will review both. Accurate financials and a cap table that matches your legal documents speed up due diligence.
Get a 409A valuation before granting options. Options priced below fair market value can create tax problems for your employees.
After the raise
Check your Delaware franchise tax. Delaware corporations owe an annual franchise tax and report due March 1. The default method can produce an alarmingly large bill for startups with many authorized shares. An alternative method that uses the company's assets and issued shares often results in a far smaller amount, so make sure it's calculated both ways.
Use the R&D credit. Startups with qualifying research and development may be able to apply the federal research credit against payroll taxes, which helps even before you're profitable. Development costs can also be deducted immediately again under the 2025 law.
Watch where you hire. Remote employees can create payroll and income tax obligations in new states. Register before you run payroll there, not after.
Plan for sales tax if you sell products. As revenue grows, you may cross thresholds that require collecting sales tax in other states.
Track every financing instrument. SAFEs, convertible notes, and warrants all need to be recorded correctly, and their conversion terms affect the cap table and sometimes your taxes.
We'd file the 83(b) within days of the grant, not on day 29, and keep proof of filing somewhere permanent. It's one of the least expensive protections a founder will ever have.