taxes, stock-optionsI have an LLC that has been continuously active for at least 1 year. I will likely convert to a C Corp closer to a time when I am seeking investment, and issue myself shares at that time. This article suggests the advantage of such a strategy: https://www.foley.com/new-tech-start-ups-formed-in-2011-should-consider-llc-format-at-least-initially-06-09-2011/.
However, I was wondering whether the 5 year holding period for QSBS exemptions starts at the origination of the business in any form (i.e. the incorporation of the LLC in my case), or only when the shares are issued. In other words, could there be a benefit from converting to a C Corp and issuing myself shares sooner rather than later?
For completeness, it would also be good to know how the timing works with stock option grants vs exercised options. (I believe the initial tax basis depends on the value of the exercised option, which would lead me to think that the 5 year period also starts at that time.)
According to this article, https://www.forbes.com/sites/edwardzimmerman/2016/07/18/gimme-shelter-vc-backed-ma-tax-strategies-for-qsbs1202/2/:
The holding period must be more than five years and it begins on the date of issuance of the stock of a C corporation (for example, if an LLC converts to a corporation, the holding period of the stock for this purpose begins on the date of the conversion, even though for purposes of the regular capital-gain rules, the holding period would at least partially date back to time prior to the conversion).
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