"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
According to Section 1202, an individual must receive QSBS either directly from the issuing company or through a gift or inheritance. Partnerships or LLC are allowed to transfer QSBS to a partner but not vis versa. A partnership or LLC is not a stand-alone entity but a … Read More
Not sure if the stock you’re invested in is QSBS, learn more about our QSBS Monitoring Platform The combination of tax and timing can create a moving target when trying to pin down when to exercise stock options. The tax effects of exercising stock options are also dependent … Read More
Any compensation given to employees is treated as wages; therefore, FICA (Social Security and Medicare), FUTA (Federal Unemployment), and SUTA (State Unemployment) will be paid, unless the stock is received in the form of Incentive Stock Options. There is one nuance between cash and stock wages, which … Read More