There exists great variability in how companies handle requests from shareholders regarding QSBS questions. Since both the Company and the individual shares held need to qualify, there are simply logistical challenges in companies evaluating every shareholder’s situation. For example, maybe the company was a Qualified Small Business … Read More
Qualified Small Business Stock (QSBS) is a tax incentive that I have found few are aware of and even less understand. Once you start to unpack it, you realize its importance if you spend time investing in early stage companies as it can lead to a 100% … Read More
"Never invest in anything that eats or needs repairing." - Billy Rose
Putting Section 1202 QSBS (i.e. qualified small business stock) and convertible note ("QSBS Convertible Note") in the same sentence is a recipe for an "investment needing repaired". If you have stumbled upon this page there are … Read More
Generally, when talking about qualified small business stock (QSBS) someone is referring to the direct investment they made in a small business, stock options, or the founding of a business, but limited partners (LP) in a partnership also qualify. When an LP invests in an investment vehicle … Read More
Another avenue could be to create a management holding company where the insurance, finances, and payroll are managed.
According to the AICPA, a qualified small business for Section 199A QBI can be a management holding company. Tax accountants and lawyers have been looking to Section 199A for … Read More
This scenario is a typical transaction structure that PE funds will utilize.
When a fund is acquiring a members interest in a pass through entity and not stock in a corporation the fund will set up a blocker corporation so that the income is not passing through … Read More
The below graphic illustrates a PE fund acquiring the assets of an existing company.
The PE fund will then form a new corporation and contribute the assets at FMV to the corporation in return for newly issued shares of QSBS. Remember… this can only be done if … Read More
The graphic below illustrates the ownership structure after 100% of the stock is acquired in a qualified small business.
The PE fund would form a holding company that would issue QSBS to the PE fund after infusing capital into the holding company. The holding company would then … Read More
Purchasing existing stock or assets in a company does not qualify as qualified small business stock (QSBS). QSBS has to be newly issued stock and qualify as a Section 1202 qualified small business. Refer here for details on what constitutes a qualified small business.
Section 1202 of the … Read More
As a investor in an investment fund, it is imperative to know what the tax implications may be for when you receive your pass-through distributions from the investment fund. QSBSExpert is here to help!
What Businesses Qualify for QSBS?Can My QSBS Gain(s) Be Excluded from Taxes?What are the … Read More