Founders often ask whether a Section 1202 Qualified Small Business Stock (QSBS) attestation letter is legally required. The answer is no: attestation letters are not required for QSBS eligibility. However, in many situations they can be valuable to document the facts supporting QSBS status and provide peace of mind during due diligence.
- Not legally required: The Internal Revenue Code does not mandate an attestation letter to qualify for the QSBS exclusion. Eligibility depends on meeting the statutory requirements, not on having a letter.
- Why they can still help: Obtaining a letter can strengthen your documentation, demonstrate that company counsel has considered the QSBS rules, and help satisfy investors or acquirers during diligence. It’s a proactive way to avoid questions at exit and can streamline the process.
- When to get one: If you decide to obtain a letter, do it before a liquidity event. Ideally, work with your counsel well before any sale or financing to prepare the attestation so it reflects contemporaneous facts. Waiting until after a deal is announced may limit its value.
By addressing both perspectives, you can decide whether a QSBS attestation letter fits your circumstances.
