Founders: QSBS does not require an attestation letter. Your stock purchase agreements and corporate records usually establish the basics.
But when the IRS—or an acquirer—starts asking detailed questions years later about asset composition, active business use, or qualified trade or business status, contemporaneous third-party documentation becomes invaluable.
That’s the difference between: “We believe we qualified” and “Here’s independent verification from when it actually mattered.”
If you want a contemporaneous Section 1202 attestation letter prepared at formation or early issuance, we help founders do this correctly. Talk to us to discuss your specific situation and ensure your QSBS documentation is defensible.QSBS eligibility is fragile. It’s a web of fact-specific requirements: C-corp status, gross assets ≤ $75M at issuance, active business use of assets, qualified trade or business, proper issuances, clean cap tables. One misstep—wrong asset mix, untimely issuance, operational drift—and the benefit is at risk.
Reconstructing those facts years later, during an exit or audit, is difficult, expensive, and often unsuccessful. Memories fade. Records are incomplete. Advisors move on.
An early Section 1202 attestation letter—ideally at formation or first issuances—does real work:
- Freezes key facts while they’re fresh, verifiable, and fully in your control
- Imposes discipline on assets, operations, and equity decisions as the company scales
- Creates a defensible record for founders, employees, and investors when it matters most—at exit or audit
“We think we qualified” isn’t a tax strategy. “We documented it early with third-party review” is.
The cleanest window is now: formation, early common stock grants, or before your first priced round. Once you cross certain thresholds or activities, retroactive documentation becomes much harder to defend.
Yes, attestation has a cost. So does getting it wrong—only much later, and at the worst possible time.
If you’re building in a C-corp, raising early capital, or issuing equity, talk to an advisor who actually works with Section 1202 compliance, not just general startup tax. Talk to us to prepare your Section 1202 attestation letter and ensure your QSBS documentation is defensible.
#QSBS #Section1202 #Startups #Founders #TaxStrategy
What a Section 1202 (QSBS) Attestation Letter Covers
A Section 1202 attestation letter is a contemporaneous, third-party memorandum analyzing whether a company’s stock qualified as QSBS at the time of issuance.
A properly prepared attestation letter typically documents:
- Corporate status (C-corporation at issuance)
- Gross assets test (≤ $75 million immediately after issuance)
- Qualified trade or business analysis
- Active business use of assets
- Stock issuance mechanics (timing, authorization, consideration)
- Cap table integrity and ownership records
- Known risk areas or assumptions
The letter does not create QSBS eligibility.
It preserves evidence at the only moment when the facts are clean, accessible, and verifiable.
Why contemporaneous documentation matters
QSBS disputes rarely fail because founders misunderstood the statute.
They fail because years later, no one can reconstruct the facts with confidence.
At exit—or during IRS review—companies are often asked to substantiate:
- historical asset composition,
- operational activity,
- and issuance-date compliance.
Recreating that record years later is expensive, uncertain, and often unsuccessful.
An early attestation letter anchors those facts when they actually existed.
We prepare Section 1202 attestation letters
We regularly prepare Section 1202 attestation letters for founders and early-stage companies—typically at formation, first stock issuances, or early financing rounds.
If QSBS treatment is important to you—or could represent millions in potential capital-gains savings—this is work that should be done early, deliberately, and once.
If you want to discuss whether an attestation letter makes sense for your company, reach out.
