How are my investments taxed?
The following information is based on our understanding of how some investors will be taxed on commonly used investment instruments. Each company hosted on Republic prepares its own security instrument for fundraising. We do not provide any guidance as to how such instruments may be taxed generally or how a specific investor purchasing these instruments would be taxed, and encourage you to discuss any tax questions with your tax, legal, accounting, and other financial advisers. The great majority of investments in seed-stage and early-stage companies result in complete losses for the investor, so tax losses may be expected on your investment.
Crowd SAFE investments: Crowd SAFE investments grant the holder a contingent right to receive stock or cash at a later period of time. Generally, these investments do not generate a taxable event until some type of liquidity event (e.g. when the issuer engages in an initial public offering or is acquired). Crowd SAFE instruments typically do not afford an investor the right to receive K-1s or similar tax documents.
Token DPA investments: The Token DPA is a debt-like instrument which affords the investor the right to a future cash payment or tokens. If the investor receives cash with interest, tax will be due on the interest gained. If the investor receives tokens, tax guidance is unclear as to whether there is a taxable event. You may have to pay tax on the value gained then or pay tax when you sell or trade the tokens. Token DPA instruments typically do not afford an investor the right to receive K-1s or similar tax documents.
Other instrument types such as the Crowd TPA will be taxed based on facts and circumstances unique to each instrument. You should consult with the issuing company and your tax advisor.
Generally, Republic will not provide tax documents. Nothing herein should be construed as tax advice.