
Launching a startup is hard enough without wondering if the taxman will take a massive bite out of your success. For European entrepreneurs expanding into the U.S., navigating unfamiliar tax laws can feel like an unwinnable battle. But here’s what many don’t realize: the U.S. offers a significant incentive for founders, employees, and investors who structure their businesses correctly. It’s called Qualified Small Business Stock (QSBS), and it allows each shareholder to avoid up to $10 million in federal capital gains taxes – if you meet the requirements.
So why aren’t more European founders leveraging QSBS? The answer lies in a mix of misinformation, structural blind spots, and hesitation to embrace U.S. tax strategies fully. If you’re wondering how to avoid the pitfalls and maximize your gains, here are five critical insights for taking advantage of QSBS.
- Stop Losing Money to Avoidable Tax Bills
The reality: Many European founders entering the U.S. leave money on the table by not structuring their business as a C-Corporation. A U.S. C-Corporation is the gateway to QSBS benefits, but founders often default to structures familiar from their home countries, unaware of the consequences.
If your company’s gross assets were $50 million or less when issuing shares, and 80% of those assets actively support your business operations, you might already qualify for QSBS. However, to unlock the tax exemption, you need to ensure shares are issued directly from a C-Corporation and held for at least five years.
What to do: Engage U.S.-savvy tax advisors early to optimize your structure for QSBS eligibility. Don’t let outdated assumptions or hasty decisions cost you millions in avoidable taxes.
- Don’t Neglect Your Team’s Stock Options
Your employees’ potential gains are part of your company’s appeal – but are they QSBS-ready? Many European founders overlook that early exercise of stock options is critical to starting the five-year holding clock for QSBS eligibility.
What to do: Implement a stock option plan tailored to the U.S. market, allowing for early exercise and aligning with QSBS requirements. Employees who benefit from this will feel invested – not just in their roles, but in your company’s long-term success.
- Foreign Companies Need a U.S.-Friendly Framework
If you’re running a European company entering the U.S. market, it’s not just about selling to American customers. Structuring your U.S. entity as a C-Corporation and issuing shares that meet QSBS criteria can make your venture far more attractive to American investors and employees.
What to do: Work with advisors to assess how your European parent company and U.S. entity interact. Aligning your corporate and tax structures to maximize QSBS benefits could make your business a magnet for top talent and investment.
- Unlock the Multiplier Effect of Gifting Shares
QSBS offers a per-taxpayer capital gains exclusion, meaning that holders can multiply their tax-free gains by gifting portions of their QSBS to other taxpayers. This strategy is especially useful for founders planning to divest ownership.
What to do: Before selling shares, consider gifting portions to family members or trusted advisors to maximize the collective tax exemption. Proper planning can significantly increase the wealth retained within your network.
- Challenging the Nordic Status Quo
Nordic founders in particular often enter the U.S. market without rethinking their approach to corporate structure and tax strategy. This hesitation stems partly from a startup ecosystem that doesn’t incentivize proactive tax planning. But this is a gap that can, and should, be closed.
Nordic policymakers: Stop Punishing Success – Start Celebrating It.
Across the Nordic countries, tax systems have long been admired for their fairness and efficiency. Yet when it comes to entrepreneurs and successful founders, policies such as wealth taxes and taxation of unrealized gains risk are sending a different message. The implicit narrative? That entrepreneurial success is something to be controlled—or worse, penalized.
Nordic policymakers have an opportunity to rethink the paradigm. Instead of imposing ever-tighter constraints, focus on ways to encourage founders to reinvest their wealth, expertise, and networks into the local economy. Create incentives for these innovators to become serial entrepreneurs, mentors, and investors in the next wave of groundbreaking companies.
This isn’t just about keeping talent—it’s about attracting it. Imagine a Nordic region where success is celebrated, not taxed away. Such an environment would draw ambitious founders, skilled employees, and visionary investors from across the globe, eager to contribute to sustainable growth and prosperity.
Now What?
Navigating QSBS can feel overwhelming, but the potential benefits are too significant to ignore. For European founders, aligning your strategy with U.S. tax law isn’t just smart – it’s essential. Don’t let outdated assumptions or incomplete advice hold you back from achieving your full potential in the U.S. market.
At Traksjon, we specialize in helping European founders make informed decisions about U.S. expansion, corporate structure, and tax strategy. If you’re ready to ensure your startup is QSBS-ready and set up for long-term success, let’s talk today.
Take the first step toward building a smarter, more profitable framework for your U.S. growth. Contact us now to unlock your potential.
Connect with Traksjon today to learn how you can avoid millions in taxes!
Karl Wiersholm
Partner,
Traksjon
