Whatever hat you are wearing (i.e. accredited investor, founder, employee, or contractor) you do not have to take any required steps when acquiring QSBS at the issuance date. Although legally there are no required steps the QSBS holder should still make an organized checklist before acquiring the stock. Creating a checklist involves compiling the correct documentation (e.g. an audited balance sheet) to be sure the company passes the asset test or articles of incorporation to determine if the company was formed under the correct legal structure. Also, it is good to have a tax or legal practitioner issue an opinion letter on whether the company qualifies for QSBS. Sometimes investors even go as far as to include a clause in the stock purchase agreement that says the company will maintain QSBS qualification until the stock is sold. Below is an example of what the language might be in the clause. After you have completed a thorough checklist using QSBS Expert and conducted diligence on the company for eligibility, it is up to you to maintain the investor’s qualifications.
Example QSBS Purchase Agreement Clause
The Company agrees that for so long as any of the Shares are held by an Investor (or a transferee in whose hands such Shares are eligible to qualify as “qualified small business stock” within the meaning of Section 1202(c) of the Internal Revenue Code), it will use commercially reasonable efforts to comply with any applicable filing and reporting requirements of Section 1202 of the Internal Revenue Code and any regulations promulgated thereunder; provided, however, that “commercially reasonable efforts” as used in this Section 3.1(c) shall not be construed to require the Company to operate its business in a manner which would adversely affect its business, limit its future prospects or alter the timing or resource allocation related to its planned operations or financing activities. https://www.lawinsider.com/clause/qualified-small-business-stock
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.