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Industries · Software startups · Private equity
A private equity investment brings new reporting deadlines, audit requirements and tax questions, from how development costs are deducted to whether founders keep QSBS treatment at exit. We work with founders, CFOs and fund deal teams to get the structure and the numbers right.
Serving United States, Virginia, Washington, DC, Maryland.
What we handle
Structure comes first. Funds often invest through a C corporation or a holding LLC with a corporate blocker, and the choice drives everything else: whether founders' shares qualify for the section 1202 QSBS exclusion, how management incentive units or profits interests are taxed, and whether a later sale is a stock or asset deal. Converting an LLC to a C corporation before the investment can start the QSBS clock, and for stock issued after July 4, 2025 the exclusion phases in at 50%, 75% and 100% after three, four and five years, up to $15 million per shareholder per company.
Software development is research for tax purposes. Starting in 2025, domestic research and development costs, including developer salaries, can again be deducted immediately under section 174A, while work performed by offshore teams must still be amortized over 15 years. Smaller companies may be able to recover deductions from 2022 to 2024 through time-limited elections. The research credit adds a dollar-for-dollar benefit, and an early-stage company with under $5 million of receipts can use up to $500,000 a year against payroll taxes.
Each financing round matters for losses. A change of more than 50% in ownership by 5% shareholders over three years triggers section 382, which caps how much of the company's net operating losses can be used each year, so loss models should be updated after every round. Other recurring issues: 409A valuations for option grants and 83(b) elections within 30 days for restricted founder stock; sales tax on SaaS, which some states tax and others do not; payroll and income tax nexus created by remote employees in many states; transfer pricing and foreign reporting for development teams abroad; capitalizing deal costs, with the 70% safe harbor for success-based fees; and section 280G golden parachute rules, which private companies can often address through a 75% shareholder vote.
Speak with an advisorWhere we help
Entity conversion, clean books, QSBS documentation, cap table and option plan review.
Monthly reporting, annual audits, Section 382 tracking, R&D documentation and board-ready tax provisions.
Sales tax registrations, remote payroll, offshore development entities and transfer pricing.
Diligence clean-up, QSBS at sale, 280G votes, deal cost deductions and earnout planning.
Our approach
A senior advisor reviews your facts and documents.
Scope, fees and timeline in an engagement letter.
Returns, elections and forms prepared and reviewed.
IRS contact and planning all year.
Questions
If your question isn't here, call (703) 880-8412 and you'll reach a person.
Not by itself. QSBS depends on the company being a qualified C corporation with gross assets under the limit when the stock is issued, and on how and when each shareholder acquired the stock. Redemptions around the investment and the use of LLC structures can cause problems, so review eligibility before closing.
For domestic software development performed in tax years beginning after 2024, generally yes under section 174A. Costs of development performed outside the US are still amortized over 15 years, so offshore teams change the result.
If the investment and earlier rounds add up to more than a 50% ownership change, section 382 limits annual use of pre-change losses to roughly the company's value times a federal rate. The losses are not lost, but they may be used more slowly.
It depends on the state. Some states tax SaaS as software or a digital service, many do not, and economic nexus thresholds apply once sales into a state pass set levels. A taxability matrix by state is usually the first step.
Yes. As a PCAOB-registered firm we perform financial statement audits under GAAS, including ASC 606 revenue recognition for subscription revenue, and can coordinate with the fund's reporting timeline.
Latest updates
Authorized representatives can now make balance-due, amended return, extension, proposed assessment and federal tax deposit payments for business clients online. Appropriate authorization for the client and tax matter is required.
Source: IRS (IR-2026-134)
For 2027 the joint-return standard deduction rises to $33,200, the estate tax basic exclusion to $15,480,000, the annual gift exclusion to $20,000 and the Section 179 expensing limit to $2,640,000. Our advisors recommend revisiting year-end gifting and equipment purchase plans with these figures in mind.
Source: IRS (IR-2026-133)
All 6,576 nominated census tracts, including 2,594 rural tracts eligible for enhanced benefits, become Opportunity Zones on January 1, 2027 for ten years. Investors with capital gains should review the new map before committing funds.
Source: IRS (IR-2026-132)
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