Jared Brenner’s latest Forbes article, “QSBS: What Music Entrepreneurs Need to Know Before They Build,” discusses why burgeoning entrepreneurs in entertainment should consider Qualified Small Business Stock (QSBS) when expanding their brand into other avenues, such as an apparel line, beauty brand, and/or fan platform.
QSBS has recently become a favored tax strategy for entrepreneurs of all types due to its ability to offer significant tax benefits. As Jared explains, “The phrase sounds painfully technical, but the basic idea is simple: in the right circumstances, founders and early investors who hold stock in the right kind of small business for the required period may be able to exclude a significant amount of gain from federal income tax when they sell.”
“The easiest music-world example is a product business,” Jared describes. “Think of an artist-founded streetwear label, a creator-led beauty line, or a merchandise company that grows into a broader consumer brand. Those businesses tend to be easier to understand through a QSBS lens because the rules generally fit more comfortably with companies that make or sell products.”
He continues to break down how after-tax results of utilizing QSBS may depend on choices made at entity formation, and how that can affect ownership, flexibility, and tax treatment, and urges entrepreneurs to consult with advisors from the outset of business structuring to spot issues before they become expensive and preserve optionality.
