Sage-Tips

Are benefit corporations the same as B Corps?

The B Corp Certification is a third-party certification administered by the non-profit B Lab, based in part on a company’s verified performance on the B Impact Assessment. The benefit corporation is a legal structure for a business, like an LLC or a corporation.

Does section 1202 apply to C corporations?

Only noncorporate shareholders, such as individuals, partnerships, trusts, and S corporations, are eligible for the gain exclusion under Sec. 1202 — shareholders that are C corporations do not qualify.

Do B Corps get special tax treatment?

These B Corps, are for-profit companies that have been certified by the non-profit B Lab. Entities from sole-proprietorships to; pretty much anything, can be certified as a B-Corp. A Low Profit Limited Liability Company, or L3C, takes pretty much the same approach, legislatively as a B-Corporation.

What is a Section 1202 exclusion?

Background on QSBS Section 1202(a) of the Code1 allows non-corporate taxpayers to exclude from gross income a percentage of capital gain recognized on the sale of QSBS that is held for more than five years.

Is a public benefit corporation a B Corp?

A B Corp is a certification provided to eligible companies by the nonprofit, BLabs. A Public Benefit Corporation is an actual legal entity that bakes into its Certificate of Incorporation a “public benefit”.

Does B Corp stand for benefit corporation?

The term “B Corp” is often used interchangeably to refer to both benefit corporations and Certified B Corporations, but these are actually distinct. A benefit corporation is a corporate legal entity whereas “B Corporation” is a certification, like Fair Trade or USDA Organic.

Can an S corp use Section 1202?

1202 is generally not available to exclude gain on the sale of S corporation stock or a partnership interest. The 50\% exclusion percentage was increased to 75\% for stock acquired from Feb.

Can an S Corp hold 1202 stock?

An S corporation can contribute assets to a newly-formed C corporation in exchange for QSBS. The S corporation’s shareholders would benefit from the Section 1202 gain exclusion on a pro rata basis with their ownership of S corporation stock.

Does IRS recognize B Corp?

“B-corp” is a term that has meaning for legal purposes at the state level (in the 30 states that recognize B-corps). It is a legal term, not a tax term. C-corp is a tax term referring to Subchapter C of the Internal Revenue Code. S-corp is a tax term referring to Subchapter S of the Internal Revenue Code.

Can a public benefit corporation be a 501c3?

501c: Many nonprofits, such as public benefit nonprofit corporations, can apply to be categorized as a 501c3 nonprofit with the IRS. Public benefit corporations generally fall under the 501c3 status because of the charitable purpose behind the nonprofit.

Who can use Section 1202?

Section 1202 was enacted in 1993 to encourage investment in small businesses. It allows individuals to avoid paying taxes on up to 100\% of the taxable gain recognized on the sale of qualified small business corporation stock (sometimes referred to as QSBS).

Where do I report 1202 exclusion?

Form 1099-DIV: Section 1202 gain will appear in box 2(c) of the form and will be reported on Schedule D, line 13, of your individual tax return. On line 18 & 19 of Schedule D, enter as a positive number the amount of your allowable exclusion on line 2 of the 28\% Rate Gain Worksheet.

Should companies be allowed to organize as B Corps?

The B Corp legal regime no more guarantees that those companies will make “socially responsible” decisions than existing law prevents directors from doing so. That’s not to say that providing the option for companies to organize as B Corps is a bad idea. [11]

Is stock in a corporation qualified as small business stock?

Stock in a corporation shall not be treated as qualified small business stock unless, during substantially all of the taxpayer’s holding period for such stock, such corporation meets the active business requirements of subsection (e) and such corporation is a C corporation.

Who are the ineligible corporations for Subchapter S subsidiaries?

There are also specified ineligible corporations, but these are limited to certain banks, life insurance companies, domestic international sales corporations (DISCs) or former DISCs, and corporations that have terminated S corporation or qualified Subchapter S subsidiary status within the past five years.

Should B Corp’s consider a wide range of interests?

There’s no legal reason that all companies can’t consider a wide range of interests in order to make responsible corporate decisions. Nor is there reason B Corp advocates should provide them with excuses not to do so by overstating the limitations placed on directorial discretion by existing law.