Who this affects
Employees and Investors
iOS & Android
Employees and Investors
iOS & Android
Users with holdings in companies identified as Qualified Small Businesses (QSB) will now be notified of the potential tax benefit. Carta determines QSB eligibility when performing a 409A valuation and email notifications will be sent to all users associated with the company once the valuation is accepted. In addition, vesting emails will include information about the qualified small business stock (QSBS) tax benefit.
Furthermore, users can now find a banner in the company overview page within their portfolio that informs them about QSBS eligibility, linking to a blog post to learn more. Finally, users will be notified if their exercise qualifies for QSBS once they submit an exercise request.
US Companies using Carta for 409A valuations that are QSBS eligible and all their stakeholders, prioritizing “Vested” option holders.
Emails are sent to all users associated with a company that qualifies as a QSB. If Carta determines the company is a qualified small business, emails are sent once the 409A valuation is accepted. Extra emails are sent to all users each time the company’s valuation includes eligibility.
Vesting emails will now include information about QSBS eligibility to help make a more informed decision about exercising.
A banner informing users of the QSBS Eligibility Tax Benefit can be found next to the company’s name in their portfolio. This banner appears for companies identified as qualified small businesses, including information about the potential tax benefit from exercising and the expected timeframe of the company’s eligibility.
Upon submitting an exercise request, the Congratulations page will inform users that the shares are QSBS-eligible. It summarizes the conditions and links to an Equity Education article to learn more (highlighted in red).
If Company tax data is not complete:
If Stakeholder tax details are not complete, update missing data under the Stakeholder details tab of the same Form 3922 page
5. If the missing data was entered in, return to the Compliance > Section 6039 page and click Generate to click through the steps to proceed and add company contact information. The company contact is formatted into the electronic Copy A .txt file that will be uploaded to the IRS site.
Click Generate Form 3922 to begin the generation of the files.
6. Refresh the page after some time if you see a spinning wheel or navigate away and return later.
7. Once generated, click Download reports for the tax year to download a .zip file to your local drive that contains all necessary data for Copy A (efile), and Copy B (statements).
The .zip file will be split out into the following three files:
For any filing questions, contact your tax advisor.
Public and Private Market companies with an ESPP.
This feature can be enabled on demand by reaching out to our support team or Customer Success Managers.
The product team will be enhancing Form 3921 functionality to bring it more in line with the new Section 6039 admin experience.
LPs subscribing to Funds and SPVs using Carta's Closings Tool can now E-Sign a pre-filled W-9 while filling out subscription documents.
Having LPs submit a tax form is an important part of the closings process for any Fund or SPV to ensure tax teams correctly prepare LP K-1s. We received feedback from LPs about the friction of printing, signing, and uploading W-9s and wanted to streamline the process.
For U.S. based LPs subscribing as an Individual, we can now optionally pre-fill a W-9 for them to review and E-sign in just three clicks. The W-9 is pre-filled based on the information the LP already provided as part of their subscription.
For Partnerships and LLCs
For LPs subscribing as a partnership or through a LLC we'll ask some additional questions to ensure we are accurately representing the LPs federal tax classification on the W9.
With the initial release of this product we will not be pre-filling W-8s or W-8BEN-Es for non-US LPs but will still allow them to upload their own form.
This is now available to any LPs using Carta's Closings Tool. The Closings Tool gives LPs a quick and easy way to fill out Fund and SPV subscription documents.
We are releasing a report to all Private Market companies for administrators to review their certificate cost basis and original acquisition dates. This report will allow administrators to view cost basis data prior to the delivery of 1099B tax statements to stakeholders by mid-February.
How it works
This in-app report is available by navigating from Capitalization -> Reporting -> Form 1099b cost basis report.
Administrators will be able to view columns like stakeholder details, certificate ID's, quantity of shares sold, date acquired (original acquisition date), proceeds, gain/loss, and including various cost basis fields:
From this report, Issuers can identify which certificates need to be changed and/or excluded from tax filing, and will have the opportunity to correct the data until late-January.
Who does this impact?
This report will be available to individuals with role permissions of Company Admin, and including Company Editors.
In the next month, Carta's Liquidity team will be reaching out to ensure that data has been reviewed and is considered approved by Issuers for generating 1099B statements. Stakeholders will be able to access tax statements in their portfolios by mid-February.
Companies can now adjust taxes for option exercises previously approved in Carta.
Legal administrators can navigate to the Exercises ledger (Transactions > Exercises) and select "Adjust taxes" within a ledger row dropdown to find the new tool:
The "Adjust taxes" tool will not be available for option exercises in the "Requested" status since option exercise approvers can adjust taxes as part of the exercise approval workflow.
For ACH option exercises already approved by the company or for company-entered manual exercises, the "Adjust taxes" tool will be available for use.
After a legal administrator selects "Adjust taxes" from the Exercises ledger, they'll see the following modal:
The legal administrator will be asked to provide a reason for the adjustment. Next, the following actions are available:
Note that new tax types can't be added from this modal. If you'd like to add a new tax type to the exercise, add it first in the Tax rules page (Compliance > Tax rules) and then come back to the "Adjust taxes" tool to add it to the option exercise.
Once the adjustment has been saved, both the company and the stakeholder will see a blue banner when viewing the option grant. The banner contains information about the newly adjusted tax amount and exercise cost in addition to when the adjustment was entered in Carta:
Adjusted tax amounts will also be reflected in the "Exercised and settled report" and the "Tax withholding report" (Capitalization > Reporting).
For more information, check out the support article for the new "Adjust taxes" tool: https://support.carta.com/s/article/adjust-taxes-option-exercises
Private and public companies that issue option grants.
Available to all companies now.
Companies using Carta for 409A will now be additionally assessed for qualified small business eligibility at no extra cost to the company.
Certificates issued by a qualified small business as determined by Carta will have a "QSBS" tag in the product to indicate that the shares represent Qualified Small Business Stock (QSBS). The goal of these tags is help stakeholders make more informed selling decisions.
The IRC’s definition of a qualified small business is restrictive yet vague and open for interpretation at the edges, so potential holders of QSBS should consult their tax advisor before making decisions to sell and claiming the QSBS tax benefit.
Based on company-provided information during the valuations process, Carta will assess the following criteria for qualified small business eligibility:
If a company is identified as a qualified small business, a new badge will appear in the 409A dashboard:
If a stakeholder receives a certificate from a qualified small business but hasn't yet met the 5 year holding period for QSBS, they'll see a "QSBS eligible" tag in their portfolio:
Drilling into the security, the stakeholder will see some additional information about the QSBS status of the certificate:
Stakeholders who have held shares issued by a qualified small business for 5 years will see a "QSBS" tag in their portfolio instead:
For detailed information about QSBS in Carta, please refer to our QSBS support article.
Companies using Carta for 409A and their stakeholders.
Users with holdings in public companies will now have the ability to view their holdings for both public and private companies straight from the Carta iOS app. Shareholders can now track market values, view total holdings value and more.
Shareholders with holdings in public companies.
With an aim to provide functional and streamlined experiences for shareholders, we’ve brought the ability to view public holdings on the Carta iOS app. Public company cards will now be present among private companies on the home screen. The following information will be displayed for each public company card with the ability to view further details when clicked:
We are making it easier for companies to keep employees, investors, and other stakeholders informed about their holdings and company changes.
Companies have historically been able to grant viewing permissions to their stakeholders via our Cap Table Sharing page and features. This experience, however, was burdensome for many company administrators who found themselves having to change sharing settings as new stakeholders were added to their cap table or existing stakeholders changed their relationship to the company, such as an employee leaving the company or an investor exiting their position.
With our new Shareholder Experience page, company administrators can designate what type of information they want to share with their different stakeholders and set rules based on these preferences. By setting permissions by rules instead of a stakeholder-by-stakeholder process, we make it easier for company administrators to get the right stakeholders the appropriate information and reflect their information sharing philosophy.
Companies can choose to enable a specific shareholder experience based on the relationship of the stakeholder to the company. For example, companies can choose what information founders, investors, employees, and former employees, and other stakeholders access on Carta. We’ve renamed, updated, and simplified our access levels to Restricted, Basic, Advanced, and Full Details. We include a “Recommended” level for different relationships (e.g. Investors = Advanced) to help guide founders and other company administrators on setting up their Shareholder Experience based on user feedback.
We’ve also added a new rule where former stakeholders--those who no longer have an active investment or holding in the company--will automatically be downgraded to Restricted automatically. This means that as stakeholders enter and exit the cap table, their respective shareholder experience will update automatically.
New Shareholder Experience page: Group levels
We know that sometimes it’s important for company administrators to create experiences specific to a single stakeholder or user. The new Shareholder Experience feature allows companies to set overrides for specific stakeholders in the “Individual levels” tab. We also provide information on that stakeholder’s relationship and holdings information.
New Shareholder Experience page: Individual levels
To help ensure company administrators set access levels that best fit the needs of their stakeholders, our access level guide is clickable from either the Group Level or Individual Level views of the new Shareholder Experience.
Access level guide
We appreciate our users’ feedback on how to make this page clearer and easier to use. We hope these improvements save company administrators valuable time and help them mirror their company information sharing philosophy in our software.
The cap table sharing page is available currently via a limited release to select Carta companies. In the coming weeks, we will begin to allow additional companies to migrate to the new Shareholder Experience feature set. This new product is not limited by subscription tier.
Companies with the new Shareholder Experience features enabled can visit Stakeholders > Shareholder Experience.
If you’d like to enable the new Shareholder Experience page for your company, you can also contact us.
Non-individual Limited Partners who complete subscription documents on Carta can now be KYC’ed instantly.
This release is a follow-up to our KYC for Individual LPs feature. If your fund leverages Carta’s KYC/AML service and you have non-individual Limited Partners (LPs) completing subscription documents in Carta, these LPs can now be instantly KYC’ed on the platform. Carta instantly KYCs the LP's control person and beneficial owner(s) in addition to the LP entity itself.
Carta’s instant KYC feature is made possible by Carta integrations with identity and verification databases like LexisNexis, Ekata, Socure, and more.
How it Works
As an LP completes their subscription documents, non-individual LPs (for funds that avail of Carta’s KYC/AML service) will see a dedicated Know Your Customer section. Upon landing here, LPs will first be asked if their control person and beneficial owner(s) are all US persons -
If the control person and beneficial owner(s) are all US persons, then the LP will be shown forms to enter KYC information for these individual(s) -
Once subscription documents are signed by the LP, the following are instantly KYC'ed: the LP entity, control person, and beneficial owner(s). If all pass KYC, this is immediately reflected in the Carta UI and General Partners are notified to countersign -
Timing: Rolled out to all on Aug 31, 2021
Audience: US-based Limited Partners, General Partners