Did you invest in a Republic offering in the last year or before? Curious as to how your investment may impact your taxes? While Republic cannot give you tax advice, we will provide you with some general information and resources. We hope you find these guidelines helpful.
Tax liability is largely determined by what type of entity you invested in:
The first step is to determine whether you have invested in a C corporation or an LLC. You can find this information on each company's Form C, which is attached to the deal page offering.
What if I invested in a C-corporation?
In general, U.S. investors investing in C-corporations on Republic will only need to report income when they realize a gain or loss for tax purposes and no K-1 is due to you. In other words,
In these cases, the company you invested in (or its 3rd party transfer agent) will provide you with the necessary documents. Republic won’t be sending any tax forms to you.
What if I invested in an LLC?
If you invested in an LLC and you currently hold a Crowd SAFE, Token DPA or other security, no K-1 is due to you. If your Crowd SAFE has been converted, you should reach out to the issuing company for a K-1. If your Token DPA was repaid in Tokens, you should consult with your own counsel to determine if you have any tax liabilities.
What if the company I invested in went bankrupt?
The company or its trustee is responsible for providing you tax documents to reflect the loss. Republic may assist these companies in distributing tax documents, but cannot create them or secure them until there is court approval of the winding up of the business.
What if I sold the security I acquired on Republic in a private transaction and realized a gain?
Once you sell a capital asset, such as Crowd SAFE, and realize a gain, the capital gain (i.e., [sales price] - [basis]) is taxable.
What if I sold the security I acquired on Republic in a private transaction and realized a loss?
Once you sell a capital asset, such as Crowd SAFE or a Token DPA, at a loss, the capital loss ([basis] - [sales price]) qualifies as a capital loss and can be used to offset capital gains (and in some cases, ordinary income).
For further information, you may consult the following resources:
Republic Core LLC (“Core”) provides technology and support services to OpenDeal Inc. and its affiliates (collectively, the “Republic Ecosystem”). Republic Note holders and as well as users of the site and services maintained by the Republic Ecosystem, regardless of and their activities on or relating to the Republic Ecosystem, are subject to the applicable terms of service, in their entirety.
Core is currently conducting an offering of Republic Notes under Rule 506(c) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) to persons who are accredited investors, as that term is defined in Rule 501. Only accredited investors are eligible to participate in the Rule 506(c) offering. Accredited investors who wish to participate in the Rule 506(c) offering should receive and review carefully the Private Placement Memorandum pertaining to that offering, as it contains important information for potential investors to consider prior to making an investment decision. Accredited investors who wish to participate in the Rule 506(c) offering will be required to (i) complete a subscription agreement, (ii) acknowledge that they have received and read the Private Placement Memorandum, and (iii) provide information verifying their status as accredited investors.
Core is also “testing the waters” with respect to the sale of Republic Notes under Regulation A of the Securities Act. The “testing the waters” process allows companies to determine whether there may be interest in an eventual offering of its securities to qualified purchasers under Regulation A. Core is not under any obligation to make an offering under Regulation A. No money or other consideration is being solicited for an offering under Regulation A at this time and, if sent, it will not be accepted.
Core may choose to make an offering to some, but not all, of the people who indicate an interest in investing, and that offering may or may not be made under Regulation A. For example, Core may choose to proceed with its offering under Rule 506(c) without ever conducting a Regulation A offering, in which case only accredited investors within the meaning of Rule 501 will be able to buy Republic Notes.
If and when Core conducts an offering under Regulation A of the Act, it will do so only once (i) it has filed an offering statement with the Securities and Exchange Commission (“SEC”), (ii) the SEC has qualified such offering statement and (iii) investors have subscribed to the offering in the manner provided for in the offering statement. The information in the offering statement will be more complete than any test-the-waters materials and could differ in important ways. Prospective investors who are interested in participating in the Regulation A offering must read the offering statement filed with the SEC, when that offering statement becomes publicly available.
No money or other consideration is being solicited at this time in connection with any potential Regulation A offering and, if tendered, will not be accepted. No offer to buy securities in a Regulation A offering can be accepted and no part of the purchase price can be received until an offering statement is qualified with the SEC. Any offer to buy securities may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance is given after the qualification date. Any indication of interest in Core’s offering involves no obligation or commitment of any kind.