QSBS in ETA

September 19, 2022

by a searcher from The University of Texas at Austin - Red McCombs School of Business in Austin, TX, USA

Few questions on QSBS in ETA:
Assuming your target qualifies as a sec1202 business,

1) What experience does anyone have with holding company structures taking advantage of QSBS? How did you structure it assuming the acquisition target company is a typical LLC and/or S-Corp?
2) What are key considerations and mental models for thinking about structuring as a C-corp to take advantage of QSBS vs. other?
3) What key "tripwires" must one be cognizant to avoid being in violation of QSBS rules? Any horror stories to be mindful of?

Any direction would be helpful. Much thanks in advance.

Reply by a searcher
from Brigham Young University in Salt Lake City, UT, USA

We looked at this from the reverse (acquiring a c-corp and enabling the seller to qualify for QSBS treatment). We planned to use a drop-down structure of legal entities to achieve our desired end state. We didn't pursue maintaining the c-corp and trying to qualify for QSBS ourselves, but I spoke with Boulay LLP at the time who said they had recently helped a searcher structure a deal to get QSBS down the road. Boulay or another CPA from the search community could likely give you some high-level guidance.

Reply by a professional
from Texas A&M University in Dallas, TX, USA

^redacted‌ this just came across my feed, but there is a lot to consider for###-###-#### including really considering if it will be available in the next 3-5 years (or whenever your exit is contemplated). Happy to answer any general questions.

+3 more replies.

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