#startup
Essential accounting and finance guidance for startup founders
A Section 83(b) election lets founders and early employees pay ordinary income tax today on the full value of restricted stock instead of at each vest. Filed within 30 days on IRS Form 15620, it can convert millions of phantom ordinary income into long-term capital gain and start the QSBS holding clock on day one.
Section 382 caps how fast an acquirer can use a target's net operating losses after an ownership change — annual limit equals the loss corporation's equity value times the long-term tax-exempt rate (about 3.58% in early 2026). Here is what triggers it and the legitimate workarounds.
Rule 506(b) and Rule 506(c) of Regulation D both allow uncapped private placements but differ sharply on marketing and verification. 506(b) bans general solicitation and permits up to 35 sophisticated non-accredited investors on a reasonable-belief standard; 506(c) permits public solicitation but requires reasonable steps to verify every purchaser is accredited. A March 2025 SEC no-action letter lets issuers rely on $200,000+ individual or $1 million+ entity minimum checks as the primary verification step.
Section 382 caps a startup's pre-ownership-change net operating loss deductions at the pre-change fair market value multiplied by the long-term tax-exempt rate (about 3.56 percent in February 2026), triggered when 5 percent shareholders collectively gain more than 50 percentage points over a rolling three-year testing period.
Section 83(i) lets qualified employees of qualified private companies defer federal income tax on RSU settlements and NSO exercises for up to five years. The 80 percent grant rule, mandatory escrow, and 30-day election deadline explain why adoption stays in the single digits — and when the election still pays off.
A founder's guide to SOC 2 Type II in 2026 — what it actually tests, realistic cost ($20K–$35K first year) and timeline (3–12 month observation window), which Trust Services Criteria to scope, the seven controls that trip startups up, and how to keep enterprise deals moving with Type I bridge letters while the audit runs.
How venture debt and recurring revenue loans work in 2026 — pricing in the 10-13% range, warrant coverage of 0.5-1.5%, end-of-term fees, MAC clauses, and when each instrument actually extends runway versus trapping founders before the next equity round.
Exercising and holding ISOs adds the bargain element to AMTI on Form 6251 Line 2i, which can produce a six-figure tax bill before a single share is sold. A 2026 guide to the tightened AMT exemption phase-out ($500K single / $1M MFJ at 50¢ per dollar), the qualifying disposition rules under IRC §422, and the planning moves — AMT crossover exercise, §83(b) early exercise, same-year disqualifying sale, and multi-year laddering — that keep tech employees out of the trap.
Under OBBBA, the 2026 AMT exemption phases out at $500K single / $1M joint with a 50-cent rate, doubling the stealth bracket on ISO exercises. Here is exactly how the bargain element flows into Form 6251 line 2i, when a same-year disqualifying disposition eliminates the AMT adjustment, and how to plan exercises to avoid a six-figure phantom-income tax bill.
Section 1244 lets eligible founders and early investors convert up to $50,000 ($100,000 joint) of capital loss on failed C-corporation stock into ordinary loss deductible against W-2 wages, freelance income, or interest. This guide covers who qualifies, the $1 million capital ceiling, Form 4797 reporting, and the formation steps that keep the deduction defensible.
Section 351 lets founders incorporate without immediate tax only if the transferor group owns 80% of voting power and every non-voting class right after the exchange. Miss the control test, contribute services instead of property, or assume liabilities greater than basis, and the gain surfaces anyway. A practical playbook covering boot, the Section 357(c) trap, basis carryover under Sections 358 and 362, and how to preserve QSBS eligibility under Section 1202.
Section 83(i) lets qualified rank-and-file employees at eligible private companies defer federal income tax on RSU vests and NSO exercises for up to five years, but FICA is still due at vesting, the 30-day election window is unforgiving, and the 80 percent broad-based grant rule keeps most startups from offering it.
