QSBS Acquisition Criteria

Who can invest in and/or benefit from QSBS tax savings?

By

Individuals and “pass-through” entities can benefit from QSBS tax savings, but corporations investing in otherwise QSBS eligible entities cannot. 

A pass-through or flow-through entity is a legal structure that does not pay income taxes at the business level but passes earnings to its owners to be taxed at the individual’s tax rate. Pass-through entities still file taxes but all tax effects are passed to the owner with a K-1 statement. Unlike C-Corporations, pass-through entities do avoid double taxation.

The following types of pass-through entity legal structures are eligible to benefit from QSBS tax savings, as per IRC Section 1202(g)(4):

  • Partnerships
  • S Corporation
  • Regulated Investment Companies, and
  • Common Trust Funds

More on QSBS Acquisition Criteria

This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.

About QSBS Expert

QSBS Expert was founded by a group of entrepreneurs, investors, accountants and lawyers who came together when trying to navigate a QSBS situation of their own. We quickly realized that the regulations left a lot of open questions and the publicly available information was confusing to sift through…so we thought that others may also benefit from having a “go to” resource for all things QSBS.