It’s pretty great if you can manage to have the parent be 501(c)(3). Have all the early investors “donate” 90% of their investment to the 501(c)(3) and invest

It’s pretty great if you can manage to have the parent be 501(c)(3). Have all the early investors “donate” 90% of their investment to the 501(c)(3) and invest 10% in the for-profit subsidiary the old-fashioned way. They get a tax deduction, and the parent owns 90% of the subsidiary. Later on, if the business is successful, the parent cashes out at the lowest possible valuation they can pull off with a mostly straight face, and all the investors in the subsidiary end up owning their shares, pro rata, with no dilution from the parent. The parent keeps a bit of cash (and can use it for some other purpose). Of course the investors do end up owning their shares at a lower basis than they would otherwise, and they end up a bit diluted compared to a straightforward investment, but the investors seem likely to more than make up for this by donating appreciated securities to the 501(c)(3) and by deferring or even completely avoiding the capital gains tax on their for-profit shares. Obviously everyone needs to consult their lawyer about the probability of civil and/or criminal penalties.