Tax Planning
Tax planning for startup founders: an honest guide
ESOPs, founder salary vs. dividends, capital gains on exits — what actually moves the needle for early-stage founders.
Most founders ignore tax planning until they raise or exit. That's expensive. Here's what to actually do.
1. Pick the right entity
Private Limited is the default for venture-backed startups, but if you're consulting solo, an LLP or proprietorship may save lakhs in compliance and tax.
2. Founder salary vs. dividend
Salary is deductible for the company, taxable for you. Dividend is post-tax for the company, taxed in your hands. The math changes once you cross the 30% slab — and again once you take Section 115BAA into account.
3. ESOP design
ESOPs are taxed twice — at exercise (perquisite) and at sale (capital gains). Structuring vesting and exercise windows can defer tax meaningfully.
4. Capital gains on exits
Long-term capital gains on unlisted shares are taxed at 12.5% (post-July 2024). Plan exits across financial years where possible.
None of this is generic advice — get a CA who actually understands founder economics to model it for you.