How can founders, executives, and investors access liquidity without immediately selling highly appreciated stock? One potential solution is a Variable Prepaid Forward Contract (VPFC). A VPFC allows a shareholder to receive substantial upfront cash while deferring recognition of gain and retaining limited participation in future stock performance. When properly structured, VPFCs can provide liquidity, diversification, downside protection, and tax deferral without triggering an immediate taxable sale.

Can a business owner sell part of a company's value personally rather than through the company itself? In certain circumstances, the answer may be yes. Under the personal goodwill doctrine, a portion of a business's value may belong to an individual owner rather than the business entity. When properly documented and transferred, personal goodwill can create significant tax planning opportunities in mergers, acquisitions, professional practice sales, and founder liquidity transactions.

Can you still obtain QSBS benefits if your company is acquired before you have held your stock for five years? Historically, the answer was generally no. However, recent changes to Code Section 1202 now permit partial gain exclusions after shorter holding periods for certain stock acquired after July 4, 2025. In addition, Code Section 1045 may allow taxpayers to defer gain through a rollover into replacement Qualified Small Business Stock (QSBS).

Does every startup qualify for Qualified Small Business Stock (QSBS) treatment? No. One of the most important requirements under Code Section 1202 is that the corporation must be engaged in a qualified trade or business. While many technology, software, manufacturing, and product-focused companies may qualify, certain service-based businesses are expressly excluded.