Qualifying QSBS Businesses

Do Startups With No Revenue Qualify for Section 1202 QSBS?

Section 1202(e) explicitly states that “start-up activities” under Section 195(c)(l)(A) or research/experimental activities under Section 174 or Section 41(b)(4) will receive special treatment when testing for the active test. Therefore, if an angel investor is investing in a startup company that is pre-revenue and is still in the idea stage, trying to reach product-market fit, the … Read More

Can an LLC Taxed as C Corporation Qualify for QSBS?

Section 1202 states that a ” ‘qualified small business’ means any domestic corporation which is a C corporation” and does not explicitly state treatment for an LLC taxed as a C-Corporation. Although this is true,  in Ltr. Rul. 201636003 a tax-free reorganization involving an LLC taxed as a C Corporation and converted to a … Read More

Do All C-Corp’s Qualify for QSBS?

The general intent of QSBS is to encourage development of companies that are created to drive new innovations and spur job creation, however not every type of C-Corp can qualify for issuing QSBS.  Companies incorporated in the U.S. as C-Corps are eligible for QSBS unless the corporation was formed … Read More

How do you tell if a Company is a C-Corp?

To become a C-Corp, a company must file Articles of Incorporation with the Secretary of State and file IRS Form SS-4 to obtain an employer identification number (EIN).    A few indications that the Company is likely a C-Corp include: Name ends with either the identifier “Incorporated” or “Corp”.Business … Read More

What are the Benefits of Becoming a C-Corp?

Early stage companies find the C-Corp structure appealing because: C-Corps limit the liability of investors and firm owners.  The most an investor can lose if the business were to fail is what they have invested into the business.C-Corps can issue different types of equity instruments such as convertible … Read More