QSBS: Qualified Small Business Stock
US only: QSBS is a US federal tax benefit under Section 1202 of the Internal Revenue Code that allows eligible shareholders to exclude capital gains from tax when they sell qualifying shares in a qualified small business.
The basics
For shares to qualify under Section 1202, they must meet several conditions at issuance, including requirements about the company's size, corporate structure, the nature of the business, and how the shares were issued. Your attorney and accountant can advise on whether your specific shares qualify.
Cake's QSBS feature
Cake's QSBS tool tracks the information relevant to a Section 1202 analysis and generates a QSBS report for each shareholder. This gives you a structured record to share with advisors.
Requires the Cake QSBS add-on.
Important disclaimer ⚠️
Cake does not verify, audit, or guarantee QSBS eligibility. The company is solely responsible for determining whether its shares qualify under Section 1202. Always consult your legal counsel and accountant.
Generate QSBS Attestation Letter
Generate an attestation letter for investors to verify potential QSBS eligibility based on your cap table data
Go to Compliance → QSBS in the main menu.
Complete the Eligibility Checklist.
Enter the date you want to view grants prior to.
Select the holders you wish to receive QSBS letters for.
Preview the letter and Generate PDFs to My Cake.
Important: this tool assumes that where vesting has occurred, the recipient filed a timely 83B, as such the holding period started from the grant date. If this is not the case, please remove the holder from the list.
What Cake tracks
Regardless of whether you have the QSBS add-on, Cake records the information relevant to a QSBS analysis:
Original share issuance date and original issue price
Share class and type
Shareholder identity
This data is always accessible via your cap table and can be exported at any time.