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 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.

Watch the episode here:

Listen to the podcast here:

Qualified Small Business Stock Exclusions with Brandon White

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.

Brett:

Okay. So make sure you get practical with it now to think you said you used it for one of your businesses, is that correct? I did. Okay, so maybe you can tell us that story. What was that business? And you can you’re welcome to share. The numbers are not up to you, but just kind of give us how that all went down and what you liked and what you didn’t so much like about well, here QSBS.

Brandon:

Yeah, sure. So here’s the good news. And the bad news, the bad, the bad news is that I didn’t do it properly. And I found out afterward, and it was an LLC that we had to convert. And there’s a whole chart, if you look this up where if you are if you incorporate before a date, and if you’re a different type of Corporation, and you change, then you get this graduated scale that you can take advantage of. So you might not get 100%. So I didn’t get 100% on this. And that’s why I’m so proficient and understanding now for the future is because I didn’t get it, but I can’t share the numbers because I’m under an NDA because it was a media company. It was the largest social networking site, social networking, and e-commerce site on the internet for of all things Brett, sport fishermen. And I had started

Brett:

Wyoming doing some fly fishing. So hits home. It’s the first time we did it last week. I don’t know if that’s considered sports fishing or not. But that was my anyways.

Brandon:

Well, at least you’re getting a rod in your hand. Brett? That’s sport fishing in general, as we, as I define is really around saltwater fishing but, or it could be hunting big fish to that sport fishing too but the way we defined it is saltwater fishing. And it could be fly fishing, or trolling, or anything like that. But I started that company in 1996. I bootstrapped it. I actually traded stocks to fund it, which is how I learned about a lot of other taxes. I’m not suggesting anyone do that. But it did work. And then we raised money, and then I bought it back from the investors and ultimately sold it.

Brett:

Okay, excellent. And so have you done it correctly? in an organic earlier meeting, you said the C Corp earlier didn’t have to be graduated in? What other downsides were there? Because that sounds pretty sweet. Right? You get used to it deferring the tax right now.

Brandon:

No, you’re not deferring anything. You’re just not getting taxed. I can’t say for certain that that’s what a lot of venture firms in the valley here do. But it’s, I can’t imagine one of the things that they’re not doing. And that’s how they get they get that tax advantage because as you know, living in California, it’s probably one of the highest tax state states in the country. But there’s really no downside. Other than making sure that you document and do this correctly with a professional who leads you through it.

Brett:

Go and have cash goes to your account. You can buy a boat, go buy a primary house, buy whatever you want. It’s your money.

Brandon:

It’s your money, man, you earned it.

Brett:

I like that deal. Yeah, this is I’m always learning something new every day. Okay, so now let’s talk about the estate tax. Right? Because I know sometimes that can be a challenge as well. For a lot of folks, especially the exclusion of 22 million married 12 million single going to expire in 2025. And even Biden might even lower than sooner, which would take it to 7 million married, potentially three and a half million single. So anything above that 40% tax as well as the stepped-up basis being challenged. So a number of things that were thrown at you right here to see kind of where we’re what your thoughts are on that. But any thoughts on estate tax and stepped-up basis? And what’s going on here, Brandon?

Brandon:

Well, I’ve got to tell you that my wife and I don’t have any kids, I assume that our nephews and nieces will inherit our money. And I feel sad for them. I don’t plan on dying anytime soon. So I don’t knock on wood here. But I’m not a big fan of what, what’s going on here. I think what I believe and have believed because I’m still not that old is that while we do need to be cognizant of this, I think we all need to remember Brett that at least I’m old enough to know that these cycles come and go. And just because the Biden administration attempts to change it whether or not they’ll be able to be set to be determined on what’s going on in Congress and if they’re going to stay true to their word and get bipartisan support, which would be a maybe welcome from many of us in the country. You know, move forward on how we should rule But I think that even if that did get passed, it doesn’t mean it’s forever. And I think, you know, if you’re not planning on dying in the next decade, maybe a little bit more than a decade, if Biden got reelected another term, then we would, we would need, you know, you’re making a bet there. But if you’re 15, to 10, to 15 to 20 years out, I don’t see it as something to start freaking out about. But I do think that it’s not something that I like.

Brett:

Yeah, I mean, were you ready? You weren’t on 1020 1996? Right. And you take this big sell any of this wealth? You know, what, why shouldn’t the government take 40% of that? You know, I mean, like you, will you got this, you got this QSBS already, they gave you 10 million tax-free, right?

Brandon:

I mean, are you really asking me why they shouldn’t? Because I’m happy to answer that question. If you want me to.

Brett:

We don’t have to go into that we don’t go into that. But that just kind of given the folks out there who might not know about the estate tax, whether it has nothing to do with the stepped-up basis, I know that with capital gains, tax, the estate tax is 40%. On top of already what you’ve been taxed on already what you’ve earned, and it’s basically a wealth tax on your death, which, which is kind of crazy to think about is to have a look at that. And with Biden, he did a hypothetical, someone who started from zero, you know, grows his net worth to 100 million. If the proposal goes through a way that they’re proposing it, not only would the at death, that 100 million, it would be tax, there was no stepped-up basis, as well as the estate tax. They’re looking at about 61% of that Brandon, assuming all of its inside of the taxable estate, right, which the deferred sales trust, we can sell assets before you pass and move it outside your taxable estate, and other terrible things, too. But had they not done anything, literally 61 million, approximately, would be owed to the government. That seems like really, and they have actually triggered it triggers the at death, it’s triggered, you know, there’s this is not a stepped-up basis, actually, the tax is now triggered. So it could create all kinds of turmoil. So we are hoping and praying that it doesn’t go that way. Because to me, wealth in the hands of the people is always better spent more accountable and actually more generously given to people than wealth in the hands of the government. But maybe that’s maybe the big debate right Brandon?

Brandon:

Well, I guess is it maybe some people are debating it, I find it. And look, my lens is an entrepreneur who takes an incredible risk, to build something from his spare bedroom and put everything on the line. And to swallow the fact that 61% of that would be consumed by someone who feels that or an entity that feels like they should get that is an interesting point of discussion that I would welcome over a dinner.

Brett:

Yeah, for sure. But are we digress? So let’s keep moving on here. So QSBS, that’s an awesome strategy. Tell us a little bit more about what you’re currently doing. Brandon, what are you working on now? what’s your passion and your focus for helping others or growing businesses? Tell us a little bit about the podcast

Qualified Small Business Stock Exclusions: “To be successful in real estate, you must always and consistently put your clients’ best interests first. When you do, your personal needs will be realized beyond your greatest expectations.” – Anthony Hitt

Brandon:

Well, currently, I read a lot of people who helped me along the way to my success that didn’t need to help me. And I think after two-plus decades of being an entrepreneur and a lot of scars on my back, I felt like I could share a lot of the information that I’ve learned and mistakes like this, I didn’t do that qualified small business stock exclusion, right? Did I benefit from it? I certainly did. But if someone had, which someone did, a friend Luckily, taught me about it. You know, I would have been better off because of it. So I started to write up back in 1996. I originally wanted to write a newsletter that that phishing site that I sold, the original plan was to create a magazine. So, about a year and a half ago decided that I was going to start writing a print newsletter and bring my original vision forward. But we weren’t going to talk about fishing. We were going to talk about things that an entrepreneur or small medium-sized business owner or management in there would want to read, you know, from real data to I think some of the publications out there now are very aspirational and motivational. But you know, motivation wanes and behaviors don’t happen once that motivation wanes. So I thought I would write about mind-body and business with the idea of making you smarter, happier, and richer, along with investing advice that I had learned because I think very often bred entrepreneurs. We are We’re so I call it absolute focused on what we’re doing. And then we make this wealth money. And then we don’t know what to, you know, some people don’t know how to invest it. They don’t know how to invest it, they know how to protect it. They don’t know how to take care of it. And I thought to myself, well, why don’t I share what my strategies had been. And my returns had been relatively decent. I mean, over the last 10 years, my retirement account, if you want to call it that has returned about 50%. So, you know, that was it. And I didn’t do anything magical. I tell people that I didn’t do anything magical. I just followed some books and advice that I read, and I stay diligent and unemotional about the money. And so I started writing this newsletter called Delta Business Success Secrets. And then I did a podcast actually been podcasting since 1997. If you can believe that one called a podcast, it was more of an audio file on the internet. So I didn’t have to type 4000 words on a fishing report. But we have a podcast called Delta Business Success Secrets where we talk about many of the same things. In the newsletter, we go much more into depth just because we have the room and the time. And I’m not always willing to tell people the exact stocks that although maybe I should go on Reddit and do that, that’s half of a joke. But the what stocks I bought, or what our Facebook advertising customer acquisition costs are today. So in the newsletter, we go over that sort of data, which is real actionable information for small and medium-sized business owners.

Brett:

Absolutely love that. And where can people find that exact newsletter or sign up or subscribe to that?

Brandon:

Well, they can go to two places. One, they could go to brandoncwhite.com. Or you can just go straight to bsuccesssecrets.com. That’s B as in business successsecrets.com.

Brett:

Excellent. That being said, Are you ready for a lightning round Brandon?

Brandon:

I don’t know. Let’s go through.

Brett:

All right. Now, unless you know now if you go back to your 25-year-old self with the one Golden Nugget and make sure to tell yourself to do.

Brandon:

Wow, 25. Don’t believe in your head. That just because you know what to do that’s good enough. actually, execute on your plans?

Brett:

Okay, good. I like that thinking. I think by that time, I like it. Second question, biggest frustration with capital gains tax deferral options for real estate, cryptocurrency.

Brandon:

My biggest frustration is is that you really need to have someone help you and hire someone because it’s moving all the time. And the government isn’t going to alert you that you didn’t take the deduction, or you didn’t take the most advantageous method to do it. And you got to stay on top of it. So either stay on top of yourself, which takes a lot of time, or have someone help you who is a professional and spends night and day or most of their full-time job. Taking care of that for yourself.

Brett:

Beautiful love that. are you investing in real estate? If so what was the best deal real estate deal you’ve done?

Brandon:

I am investing in real estate. And the best deal that I ever did so far, was a house in Northern Virginia that we bought, it was actually a large three-story townhouse on a lake. And you know, we just got, you know, I don’t say we got lucky, I felt like the market was going up. We bought it. And within probably four years, I think we rented it for a year I forget what the return was, but on a leveraged basis, it was absolutely ridiculous. So it was at home and I’m currently looking at. I’m looking at real estate in my hometown here of Half Moon Bay, California, because I just believe that, contrary to what may be some of the press is saying that California real estate will continue to go up and mainly because you can’t develop anymore. And with that, you can’t develop a lot, especially on the coast of California. It’s set. So I’m looking for opportunities. It’s expensive as it relates to most parts of the country. But the appreciation in our own house here has gone up so significantly that I believe they’re still upside.

Brett:

Excellent, very well said favorite book or you’ve gifted or read in the past year.

Brandon:

In the past year, I was preparing for I was preparing forever. In the last year. I just read a book. I know what it’s Seven and a Half Lessons About the Brain and it is by a lady psychiatrist or psychologist. And the reason why it’s been so impactful for me is that it is Seven and a Half Lessons About the Brain by Lisa Feldman Barrett. And the reason is that new research on the brain has uncovered the idea around the triune brain, you can maybe tell him either a geek or a psychology major with the Masters as well. But it has been uncovered that to try in brain theory is not correct. And there’s actually not how the brain works. So when you start talking about the reptile brain, and how you react or how you position things, because of the rational brain, it’s completely inaccurate. And I encourage everyone to read that because it really will change how you think about almost everything you do, including business.

Brett:

Wow, check out Seven and a Half Lessons About the Brain. Excellent. Second, last question, what are you most curious about right now?

Brandon:

Wow, God, it would have been good. If you would have prepared me for this break. I know. That’s why it’s the lightning round. The most curious thing I am about right now is how do you stand up on a surfboard consistently?

Brett:

Shortboard or Longboard?

Brandon:

Longboard, in Northern California.

Brett:

All right, very good. Love it. Last question, Brandon. And we’ll let you go. After all your success helping so many people being featured in so many major publications, building businesses, selling them for a lot of money? All of those things, deferring taxes in the QSBS exclusion? How do you stay centered in your values? And how do you stay encouraged to charge forward to rea

Brandon:

I never take for granted what I have or how far I’ve come. And I always keep my ego in check. I think that the moment that you believe that you’re as good as your mind may think you are in the moment that you’ll get caught off guard. And I’m just really grateful for everything that we’ve been able to achieve along the way here. So I think that being you know, this has been used a lot. So the reason I’m hesitating is that everybody has this thing wake up and be a grateful thing, but I think it’s deeper than just this. Just that I think it’s understanding, truly understanding and being able to look back and say I really am grateful and wanting what you have, once you can once you want what you have, which that sounds simple, but it’s pretty taken me a long time to do that. But what do you want what you have you start to really be able to you really be able to be happy and live life in a positive way.

Brett:

Beautiful. Well, Brandon sees why I want to thank you for being on the show. I want to encourage you to keep using the gifts you’ve been given such as taking that dyslexia and turn it into a great work ethic and a desire to compete and to do great things. And for our listeners who want to get in touch with you, We remind them one last time where they can find you

Brandon:

that’s placed is just to tune into Brandon b r a n d o n c white.com.

Brett:

Beautiful Brandon, thanks for being on the show, and also want to thank our listeners for listening to another episode of the capital gains tax solutions podcast. As always, we believe the highest net worth individuals, those who help them they struggle with clarifying their capital gains tax deferral options not having a clear plan is the enemy, and using a proven tax deferral strategy, such as the QSBS exclusion or the deferred sales trust is the best way for you to exit highly appreciated businesses. But the deferred sales trust definitely for cryptocurrency primary homes sales and 31 exchange artwork collectibles anything you name it you can go to capitalgainstaxsolutions.com and learn about that today. And if you’re a business professional listen to this episode go to expertcresecrets.com to learn how to use the deferred sales trust to grow your business it’s expert tax seekers.com please rate review subscribe. We so appreciate everyone listening out there and take care of everyone and have a great day.

Important Links:

About Brandon C. White

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.

Love the show? Subscribe, rate, review, and share!