Tax
NOL (Net Operating Loss)
Quick definition
Tax-deductible business loss that carries forward to offset future taxable income.
A Net Operating Loss occurs when deductible expenses exceed taxable income in a year. Under TCJA (post-2017), NOLs carry forward indefinitely and can offset up to 80% of taxable income in any future year. NOLs are real assets — a startup with $20M of cumulative NOLs can shield $20M of future taxable income, saving $4-5M in federal taxes. NOLs become limited by §382 after an ownership change (typically each priced equity round). Track NOL balances; document them in tax filings; plan around §382 events.
Related tax terms
R&D Tax Credit
Federal credit for qualified research expenses, usable against payroll tax by startups.
Delaware Franchise Tax
Annual tax for Delaware corporations, often quoted wildly too high if calculated incorrectly.
Nexus (Sales Tax)
The connection with a state that triggers a tax-collection obligation.
QSBS (Qualified Small Business Stock)
Tax exemption for gains on qualifying startup stock held 5+ years.
Frequently asked questions
- What is NOL (Net Operating Loss)?
- A Net Operating Loss occurs when deductible expenses exceed taxable income in a year. Under TCJA (post-2017), NOLs carry forward indefinitely and can offset up to 80% of taxable income in any future year. NOLs are real assets — a startup with $20M of cumulative NOLs can shield $20M of future taxable income, saving $4-5M in federal taxes. NOLs become limited by §382 after an ownership change (typically each priced equity round). Track NOL balances; document them in tax filings; plan around §382 events.
- Why is NOL (Net Operating Loss) important for startups?
- NOL (Net Operating Loss) is a tax concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does NOL (Net Operating Loss) belong to?
- NOL (Net Operating Loss) is a Tax term in the StartupCFO finance glossary — alongside other tax concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about NOL (Net Operating Loss)?
- Beyond this definition, see the related tax terms below, or explore StartupCFO's insights and tools that put NOL (Net Operating Loss) in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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