Early Stage VC and friend of Cap Gains, Inc— Jay Kapoor—made an engaging QSBS video as a part of his FastBreak series. We think it makes for a great primer for the lucrative tax incentive. And it doesn’t hurt that he made it fun to watch.
Jay frames the core QSBS qualifications through the point of view of both a Seller and Buyer of qualified small business stock. Through these two lenses; Jay introduces both conditions with the punchy and easy-to-remember acronym “ABC.”
“A”: Assets; total gross assets need to be below $50M when the securities are issued
“B”: Businesses That Will NOT Qualify; (i.e. QSBS targets scalable businesses)
“C”: C-Corporation; qualifying business needs to be a C-Corp
Jay progresses to some of the more nuanced yet often-asked-about elements of IRC 1202, including: Who’s within scope for QSBS eligibility? What is Original Issuance in this context? How holding periods vary by security type; M&A implications; and even 1045 Rollovers—the sister provision which lets shareholders roll their gains from one QSB to another, as to tack holding periods to meet the 5-year holding period requirement.
At the heart of any QSBS situation, there is always that one question: Whether or not the Company at the beginning was even an eligible Qualified Small Business?
This is the core question our platform helps companies address. Learn more and get started here.
Suffice to say, we’re a fan of Jay and the video.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.