The following summarizes a “high-level” overview of the company’s Qualified Small Business eligibility based on the information you provided.
No disqualifying actions were detected regarding entity type.
If your company converted from another entity type to a C-Corp, there could be various QSBS related impacts to consider.
Only C-Corporations or entities taxed as C-Corporations are eligible to issue Qualified Small Business Stock.
Qualified Trade or Business
No disqualifying actions were detected regarding qualified trade.
While certain business activities do not qualify for QSBS, it depends on how the IRS defines these businesses' activities and how much of the business is devoted to such activities. We can help you navigate this.
It seems likely that the company would be considered a “small business” regarding QSBS as it appears gross assets never exceeded $50 million
More careful analysis would need to be performed to identify if / when the Company may have exceeded the $50M gross asset threshold, after which equity securities issued would no longer be able to qualify as QSBS.
Since the time the business surpassed $50M in gross assets the business is no longer eligible for issuing QSBS. However, QSBS issued before exceeding the $50M threshold may still qualify as QSBS if the other criteria were met.
Use of Assets
While it appears likely that the Company has met the Active Business Requirement to date, these requirements need to be met for “substantially all” of each shareholder’s holding period in order for their shares to qualify as QSBS.
It appears that the Company may not have met the Active Business Requirement, however, it is important to further consider the timeframe when the Company may have met the active business requirement as stock can still qualify as QSBS if these requirements were met for “substantially all” of a shareholder’s holding period.
No disqualifying actions were detected regarding stock redemptions.
Stock Redemptions can disqualify some or all of a company’s shares from QSBS eligibility.
QSBS Expert can help you assess, monitor, and maintain eligibility according to Section 1202. For a custom analysis based on your information, please hit 'submit' below and a member of our team will be in touch with you shortly.