Thinking about investing in a young, promising company? Section 1202 of the tax code offers a significant incentive for individuals to do just that.

What is Section 1202?

Section 1202 is a tax provision enacted in 1993 to encourage long-term investment in smaller startup companies. The aim of Section 1202 is to permit non-corporate shareholders to exclude from gross income 100% of the gain from a sale or exchange of “qualified small business stock” (“QSBS”) acquired after September 27, 2010 and held for more than five years. There is a cap on the exclusion amount available to a shareholder, which is the greater of $10 million of recognized gain, or ten times the adjusted basis of the QSBS per qualifying corporation.Continue Reading An Overview of Section 1202 Qualified Small Business Stock

Modern Counsel magazine recently featured Erin Sedloff, the Associate General Counsel for Mainsail, a client of Winstead. Erin joined Mainsail in 2021 and established a legal center of excellence to provide legal support to Mainsail’s portfolio companies. Her exceptional performance as an influential and trusted advisor to the founder teams of Mainsail’s portfolio companies has

When acquiring or selling a company, many nuances exist in various stages of the process, some of which are not readily apparent on their face. One of those nuances is the interplay between accounts receivable and working capital.

Often, in an acquisition, a portion of the purchase price will essentially remain in the target company’s bank account as “working capital.” Working capital is the amount of cash required for a company to operate over a set period of time. The amount of working capital typically will not be a set number, rather, there will be a working capital target on which to base the purchase price on, and the final working capital will be delivered at closing, or determined post-closing.Continue Reading Working Capital and Accounts Receivable

Emerging growth companies commonly search for an influx of cash through funding provided by investors. Venture capital firms, angel investor groups, and high net-worth individuals (collectively, “Investors”) are common sources tapped for obtaining that much-needed cash. In these scenarios, the Investors provide cash to the corporation in exchange for shares of the corporation’s preferred stock. Each time a corporation offers its stock for cash, a new series of preferred stock is created. The name of the financing round generally corresponds to the name of the series stock. Typically, the initial rounds of financing are known as a “Series Seed” or “Series A” round, followed by a “Series B,” then “Series C,” and so on and so forth as further funding is taken in over the years. When going through these financing rounds, whether the very first Series Seed round to the last financing round before an exit, the same agreements are entered into and amended to memorialize the rights, privileges, and preferences of the various series of preferred stock offered.Continue Reading Venture Capital Financing: An Overview of Financing Documents

On January 1, 2021, Congress enacted the Corporate Transparency Act (the “CTA”) as part of the Anti-Money Laundering Act of 2020 and its annual National Defense Authorization Act. The new legislation requires certain entities to report information about their owners, management and the individuals who helped create the entities to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The information reported to FinCEN is intended to assist law enforcement in combating money laundering, tax fraud, terrorist financing, and other unlawful activities that occur through shell and front companies.Continue Reading The Corporate Transparency Act (Part 1): An Overview

On January 1, 2021, Congress enacted the Corporate Transparency Act (the “CTA”) as part of the Anti-Money Laundering Act of 2020 and its annual National Defense Authorization Act. The new legislation requires certain entities to report information about their owners, management and the individuals who helped create the entities to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The information reported to FinCEN is intended to assist law enforcement in combating money laundering, tax fraud, terrorist financing, and other unlawful activities that occur through shell and front companies.

This is the second article in a new series about the CTA. This edition will provide a more detailed look at the exemptions from reporting requirements under the CTA. Continue Reading The Corporate Transparency Act (Part 2): Exemptions from the Reporting Requirements

On January 1, 2021, Congress enacted the Corporate Transparency Act (the “CTA”) as part of the Anti-Money Laundering Act of 2020 and its annual National Defense Authorization Act. The new legislation requires certain entities to report information about their owners, management and the individuals who helped create the entities to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The information reported to FinCEN is intended to assist law enforcement in combating money laundering, tax fraud, terrorist financing, and other unlawful activities that occur through shell and front companies.

This is the third article in a new series about the CTA. This edition will outline the information required to be reported to FinCEN by reporting companies and highlight the timeline for reporting such information.Continue Reading The Corporate Transparency Act (Part 3): Reporting Requirements

On January 1, 2021, Congress enacted the Corporate Transparency Act (the “CTA”) as part of the Anti-Money Laundering Act of 2020 and its annual National Defense Authorization Act. The new legislation requires certain entities to report information about their owners, management and the individuals who helped create the entities to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The information reported to FinCEN is intended to assist law enforcement in combating money laundering, tax fraud, terrorist financing, and other unlawful activities that occur through shell and front companies.

This is the fourth article in a new series about the CTA. This edition highlights which individuals qualify as “beneficial owners” and “company applicants” of reporting companies and further explains the unique identifier that such individuals can apply for through FinCEN.  For more detail on what specific information is required to be reported for beneficial owners and company applicants, please read our other articles in this series: The Corporate Transparency Act (Parts 1-4).Continue Reading The Corporate Transparency Act (Part 4): Beneficial Owners and Company Applicants Defined Under the CTA

The first thing many founders/entrepreneurs think of when starting a new business is, “I need an LLC.” The establishment of a Limited Liability Company (LLC) in Texas can be a strategic maneuver for entrepreneurs and businesses aiming to leverage the benefits of limited liability and operational adaptability. In fact, a quick Google search will direct you to a myriad of websites offering step-by-step instructions, as well as online service companies offering to help you start an LLC for free.

However, at a time when personal privacy is cherished more than ever, privacy is a crucial consideration when starting a business entity. While establishing a business requires some public disclosure, several strategies can be used to preserve privacy and maintain anonymity.Continue Reading Texas LLC Formation: 4 Privacy Considerations for Entrepreneurs

With over twenty years of experience partnering with bootstrapped founders, Mainsail Partners has established itself as a leading growth equity firm specializing in helping B2B software companies scale and achieve sustainable growth. The firm’s collaborative and hands-on approach is anchored by Mainsail’s Operations Team, comprised of individuals who work beside founders and management teams to navigate the opportunities and challenges in the critical growth stage between $5 million and $50+ million of recurring revenue. The mission of this team is to help portfolio companies recruit key executives, accelerate product development, scale go-to-market, and build out critical systems and data infrastructure to support growth.  Continue Reading Mainsail Partners