Re:Ask HN: At what point selling equity of startup becomes p...
by NiceWayToDoIT on Thursday December 24, 2020 @01:39AM
(#25525500)
James thank you very much for the answer.
> When you sell shares you pay personal income tax.
When I watch "Dragons Den"/"Shark Tank" investors always bid for higher percentage of the startup, and as a rule, they always ask how founder intends to spend that money, therefore I concluded that the money stays in the company.
Now, as you say, if I understood correctly, that money is transferred to private not corporate bank account, is it reinvestment of the sold company shares exempted of the both personal income tax and corporation tax?
I mean if you ask a VC to invest $100K for 10% as you need it for growth and that goes on your private account, in UK at least you would need to pay 45% on all money you made that year, so let say if you earned additional $50K on permanent job elsewhere you would pay $67.5K total - significantly reducing your ability to live and scale the company.
> When you sell shares you pay personal income tax.
When I watch "Dragons Den"/"Shark Tank" investors always bid for higher percentage of the startup, and as a rule, they always ask how founder intends to spend that money, therefore I concluded that the money stays in the company. Now, as you say, if I understood correctly, that money is transferred to private not corporate bank account, is it reinvestment of the sold company shares exempted of the both personal income tax and corporation tax?
I mean if you ask a VC to invest $100K for 10% as you need it for growth and that goes on your private account, in UK at least you would need to pay 45% on all money you made that year, so let say if you earned additional $50K on permanent job elsewhere you would pay $67.5K total - significantly reducing your ability to live and scale the company.