It depends on what investment structure you used.

Wefunder has done fundraises using three investment structures: Direct, Custodian, and SPV. Depending on the investment structure, you will have different tax obligations.

Direct - Investors sit directly on your cap table; no intermediary structure was used. This applies to most fundraises from mid-2020 and prior.

You are responsible for tax filings and distributions to your investors. Since the investors are direct owners of your company, Wefunder is unable to assist with taxes. However, we are happy to help distribute documents to investors by uploading them into our system.

Custodian - Investors sit in our Custodian Structure, meaning that XX Investments, LLC (an SEC-registered transfer agent) holds legal title to the investments. Your investors are all listed as one line on your cap table. This applies to most fundraises from mid-2020 through mid-2021.

For tax purposes, the Custodian structure acts the same as having direct investors, meaning that you are responsible for tax filings and distributions to your investors. Wefunder is happy to help advise in this process and distribute documents to investors by uploading them into our system; however, it’s ultimately your responsibility to get tax forms to each investor.

SPV - Investors sit in a special purpose vehicle, which is an LLC used for the sole purpose of holding your investors. This applies to most fundraises pre-2016 and post mid-2021.

For tax purposes, the SPV is an LLC taxed as a partnership. Investors are owners of this SPV, and the SPV is the only direct investor in your company. You should therefore issue tax documents to the SPV the same way you would any other investor. For example, if you’re an LLC, you will likely send yearly K-1s to the SPV. Wefunder will then take care of any tax filings necessary on behalf of the SPV and distribute tax documents to your investors. Keep in mind that if you used Early Bird terms in your fundraise, your Early Bird investors will be held in a separate SPV from your Regular Bird investors, so two tax documents will be required.

If you’re not sure what structure you used, check your Manage page, where you can see the structure on a per-investor basis.

The URL to your Manage page is: wefunder.com/[Your company slug]/manage

Examples of what a Direct, Custodian, or SPV investment might look like:

This is for educational purposes only, and should not be construed as tax or legal advice.

Questions? Reach out to updates@wefunder.com