How Mezcalum leverages Carta and QSBS to reduce capital gains taxes for shareholders

Alcoholic beverage startup Mezcalum used Carta’s guidance to tap into a lesser-known tax strategy benefiting its investors, founders, and employees. The emerging mezcal brand helps its shareholders take advantage of exclusions on capital gains taxes—in some cases, these exclusions could reduce capital gains taxes by 100%.

Qualified Small Business Stock (QSBS) is a U.S. tax benefit designed to help eligible shareholders of qualified small businesses. Carta uses data from companies’ cap tables and 409a valuations to confirm eligibility, then provides official QSBS attestation annually to help founders, employees, and investors keep more of their gains. Attestation also lets the company show value to potential investors.

QSBS attestations for a strong start

For Mezcalum Chief Financial Officer Sivan Cotel, early-stage QSBS attestations are a clear strategic advantage—and a boon for founders.

“Most of the time, when we talk about QSBS, it’s in the context of benefit to investors, but the biggest benefit may be to founders, because they have large stakes in the company and nearly the entirety of their returns are going to be gains,” he said, “Also, founders hold shares from day one, so they’re likely to be the earliest shareholders to meet the five-year holding-period requirement for the exclusion.”

“The benefit of a QSBS exemption can be huge for founders. Why would you not want that certification upfront? That way, when things really start to accelerate, you already have all the backup you need to prove to the IRS that you qualify. From my perspective, founders should have their QSBS attestations done as early as possible.”

Showing value to investors

Cotel also thinks of QSBS attestations as another way to attract investors. That’s part of why Mezcalum works with Carta. Comprehensive ownership tools and solutions make it easier for startups to demonstrate value.

“When we raise money, we need a clean cap table. I want our investors to see that we’re organized, so they have a good experience and want to continue investing in Mezcalum. If someone writes a check and then there’s no Carta, just a spreadsheet, they might be hesitant when it’s time to potentially write a second check.”

With QSBS attestations, Mezcalum further signals it can provide strong financial outcomes in the long term. For investors that satisfy all required conditions, QSBS exemptions protect up to ten times their investment or $10 million, whichever is greater, from long-term capital gains taxes.

“For our investors to take advantage of the QSBS exemption, Mezcalum has to meet certain conditions. Now I’ve got certification that our company will qualify based on its structure and other factors. Our SAFE holders haven’t converted yet, so do we need an attestation for them this early? No. But should we have one anyway to show any investor that they can qualify? Yes.”

As Mezcalum grows, Cotel needs to stay on top of investor relations. Carta lets Mezcalum manage the basics without unnecessary stress.

“Sometimes being a CFO can feel like you’re an army of one,” said Cotel. “You’re always working to protect the company from potential chaos. Carta helps us get and stay organized.”

“We have all the right tools to arm our investors with information about potential gains without overkill. That used to be a hard balancing act for most CFOs. It required more art than science, but with Carta, it’s more science than art.”