Qualified Small Business Stock Exclusions with Brandon White
Brandon White is an entrepreneur with two successful exits so far under his belt, he worked for two venture capital firms and marketing and at a $200 billion internet company and has been a CEO of venture-backed companies. He’s been featured in Forbes Entrepreneur Magazine, Success Magazine, Fast Company. He took all this experience with him and he means teams his powerful mindset tunes his body and cookie builds businesses and developed a new framework as a shortcut for himself. He easily turns his ideas into products, products into businesses, and quickly ramps up sales.
A lifelong entrepreneur had a few stops in between as a venture capitalist working for two venture capital firms. He built an online business that generated a six-figure passive income for me for over a decade, a clothing business, and a technology company. For Brandon having dyslexia is a gift given and he turns it into a great work ethic and a desire to compete and to do great things.
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Brett:
I’m excited about our next guest. He’s an entrepreneur with two successful exits so far under his belt, he worked for two venture capital firms and marketing and at a $200 billion internet company and has been a CEO of venture-backed companies. He’s been featured in Forbes Entrepreneur Magazine, Success Magazine, Fast Company, many others, he took all this experience with him and he means teams his powerful mindset tunes his body and cookie builds businesses and developed a new framework as a shortcut for himself. With it, he easily turns his ideas into products, products into businesses, and quickly ramps up sales. Please welcome to the show with me, Brandon C. White. Hey, Brandon, how are you doing?
Brandon:
Hey, thanks a lot, Brett for that.
Brett:
Absolutely. Welcome to the show. For our listeners to get to know for the first time, can you give us a little bit more about your background and your current focus?
Brandon:
My background is, I think I’m a lifelong entrepreneur, I had a few stops in between as a venture capitalist working for two venture capital firms. And I made a stop at America Online, back at what now is the early days, and had a lot of fun there. And then after business school, went out back into the entrepreneur side of things. And I’ve been on that side ever since. And luckily enough, and grateful to have two exits so far. And my current focus is I’m an angel investor. And I invested in several businesses. And I have my own business, which is really a media company, if you will, where I publish of all things bred a print newsletter that is only available in print, so you can’t even find it digitally. And it’s written for entrepreneurs to make them smarter, happier, and richer.
Brett:
Amazing will absolutely love that and to get to know you a little bit more Brandon C. White, by the way, you can find Brandon C. White at brandoncwhite.com. I believe we’ve all been given, you know certain gifts in this life. And I want you to go back, if you would with me go back to maybe your high school days, or college days or whatever when you were younger, and maybe there’s a strength or a gift that you’ve been given that you believe you’ve been given? What are those? And how does that help how you help and bless people today.
Brandon:
As ironic as it may sound, I think that having dyslexia was my superpower. Now, if you had asked me that, through elementary school, I think my answer would have been a lot different because it was really hard. But what dyslexia did for me, is being well, having to work extremely hard for everything that I did academically, was just something that I don’t know, maybe brought out an innate thing that I had that, you know if you asked me my why am I just like to compete. And I compete with myself, and I just want to try to be better every single day, whatever that means. And, and it’s true, I’m highly competitive. And sometimes I have to put that into check just because, you know, I’ll be competitive with my wife, my wife, who’s a wonderful woman, sometimes, you know, it can be overwhelming. So I’m really intense in that way. But I’ve had to have that intensity and that focus and that drive because it just was so hard. I still to this day can’t spell out words, I can’t hear the sounds, I memorize everything. And I just taught myself to memorize things and read them. So I think that that really just gave me this intense passion to be great. And that’s really what got me to where I am today, among many other things, and many other people who helped me that didn’t need to, along the way in including my wife who I always want to make sure that I mentioned because I think entrepreneurs forget many times that our most important team is their partner and their family.
Brett:
Beautiful very well said taking dyslexia to an extreme, helping it to forge extreme, extremely hard work ethic, and then taking that to competition. And then making sure that you’re aligned well with your spouse is that fair summary.
Brandon:
I think that’s a really good summary.
Brett:
Excellent, very good. Let’s move to the next question. We’re gonna talk about qualified small businesses. Stock exclusions, okay. So this is, imagine owning stock in a company where the price is appreciated greatly, then you sell it and you pay no tax on your profit. Apparently, that’s what you can do with qualified small business stock QSBS. So Brandon is going to share a little bit about his experience with this. In fact, he, I believe used it for one of his business sales. So Brandon, let’s dive into it. And what’s the biggest kept secret when it comes to the qualified small business stock exclusion?
Brandon:
I think the biggest secret is, is that you get chunks of $10 million for the most part, tax-free, and the way that it works, and I am not a lawyer, accountant, financial person, so you should consult your you’re your professional with this. But as an entrepreneur, I’ll tell you that, that when I learned about this, it was really incredible, because imagine being able to get profits out almost tax-free. Now I say almost because different states, we live in California, and they have their own rules around using this. But effectively what it does Brett it, it says that if you have a C corporation, and if you have five years of an of history in that Corporation, and that Corporation was worth less than $50 million, when you either invested or started it, that you qualify for this stock exclusion, that allows you to take what it says is up to $10 million tax-free, the dirty little secret about this great tax haven, if you will, I don’t know what to call it is that you can take out chunks of $10 million. So you really should consult a lawyer or you know, a tax attorney or a tax accountant with this. But what they can do for you is, is you can set up separate entities. So you could also give $10 million to your wife, you could give $10 million to your kids, you could set up LLCs that you may or may not own, that also received that $10 million. So it effectively would allow you to sell a 50 or $100 million, type our company and get that money at very low taxes, which is, you know, I believe we all should pay our fair share. My wife always reminds me that as we’ve traveled, you go to other countries and you find this extreme poverty that is not a place that we want to live in, in the United States of America. But at the end of the day, I think optimizing our tax strategy is always a smart thing.
Brett:
Yes, very well. So I couldn’t agree with you more. So okay, so in summary, if you have a C Corp, and you’ve I guess been owning or operating it for less than five years, and it’s if you when you first started, it was less than $50 million, I guess startup, you can take chunks out of it $10 million tax-free now when are you selling that position? And then receiving that cash? And then what are the limitations to this? Like, what do you need to do with the cash? Or where is it going from there?
Brandon:
Well, I hope it’s going into your investment account, that’s going to earn more money. But that and I want to say one thing, my understanding of this, and you saw that is that you must have own that stock for at least five years. Got it. So you might you basically are vesting that stock effectively is what the government is saying. And they’re doing that so that you just don’t do these quick flips. I guess in who wrote this, I believe this was done early in the Obama administration. So effectively, that’s the court needs to be aged. And you can, or what I have been doing is to build a strategy around that, where I have a C corpse that is aged, that could hold intellectual property or could buy another company. And now you have that mechanism. So it would allow you if you give some forethought to this to have a three-year company do say a flip, but you could build and sell a company within three years. And you could almost roll it into a C Corp. There’s a lot of nuances here, depending on that type of company and whether it’s a real estate deal or a technology company that you need to take into consideration. But what I’ve been doing is that and then I use a structure where I have an S Corp. For my management company, I took I borrowed this, if you will, from what I learned in the venture capital business, as it relates to how venture firms set up the different funds and the management companies that manage each one of those funds. And I effectively morph that into an entrepreneur strategy where I can have my escort. Get a lot of money. income, so that I get all the tax advantages that come along with an S corp and a 401k. And all these things that you can do, while still maintaining that C Corp as the company. So that if and when we ever sold one of those companies that we would then be able to take advantage of this qualified small business stock exclusion.
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