To pin down if your stock options qualify for QSBS, whether exercised or not, you should first run through the QSBS criteria to ensure that the underlying stock is QSBS qualified. Explore the basics of QSBS here. If your company recently had a round of financing, the … Read More
YESSSS it is possible to make a "tax-free investment" without needing to qualify as a 501(c)(3) nonprofit, government entity, or investing in municipal bonds. Navigating the tax code is like playing chess, you need to have a strategic gameplan with various scenarios mapped out to make your … Read More
QSBS + Stock Options = Maximized Returns If you are an employee or contractor and you have received stock options there are a few questions that are imperative to ask upfront (i) what are the tax effects, (ii) when should I exercise my stock options, (iii) do my … 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