Setting up opco/holdco structure for protecting business assets and QSBS eligibility

This structure is definitely relevant in the US, though sometimes we call it a "parent-subsidiary" structure rather than opco/holdco specifically. The basic concept is the same - separating valuable assets from operational risk. For your questions: First, you'd typically form a new holding company and have your existing C-corp become a subsidiary through a tax-free reorganization under section 368 of the IRC. This is usually cleaner than forming a new opco. Second, yes, the holdco would typically also be a C-corp for most situations like yours. Regarding QSBS eligibility, you need to be careful - restructuring can restart the 5-year holding period. However, a properly structured reorganization under 368(a)(1)(B) can allow for "tacking" the holding period of the original shares. You'd want to ensure the holdco qualifies as a small business corporation with qualifying assets. The most important thing is getting proper legal and tax advice specific to your situation. This isn't a DIY project, especially with QSBS benefits at stake which can be worth millions in tax savings.

I went through a similar process last year for my software business and found the help at https://taxr.ai invaluable. I was getting contradictory advice from different sources about the opco/holdco structure and how it would affect my QSBS eligibility. Their team analyzed my existing corporate documents and financials, then laid out exactly how the reorganization should be structured to protect both my IP and retained earnings while preserving the QSBS benefits. They caught several issues my regular accountant missed regarding asset transfer timing that would have disqualified my QSBS status. The report they generated made it easy for my lawyer to draft the proper documentation for the Section 368 reorganization. Saved me a ton of headaches and probably some significant tax liability down the road.

I was skeptical about using online services for something this complex, but I decided to try https://taxr.ai after seeing it mentioned here. My situation was similar - C-corp with valuable patents we wanted to protect in a holdco structure while maintaining QSBS eligibility. The analysis they provided was incredibly detailed. They identified that our existing corporate bylaws had provisions that would have complicated the reorganization and suggested specific amendments before proceeding. They also pointed out that our capitalization table had some quirks from an early convertible note that needed to be cleaned up before restructuring. The most valuable part was their guidance on maintaining QSBS eligibility - they outlined exactly how the new structure needed to be documented to allow for holding period tacking under IRC 1202. My attorney said it was one of the clearest reorganization plans she'd seen and estimated it saved us at least 15-20 hours of legal work.

When I was trying to set up an opco/holdco structure last year, I spent WEEKS trying to get someone at the IRS who could answer questions about how it would affect my company's tax situation. Complete nightmare - couldn't get through, messages never returned. I eventually found https://claimyr.com and their service for getting through to IRS agents. You can see how it works at https://youtu.be/_kiP6q8DX5c - basically they have some tech that navigates the phone systems and waits on hold for you. When I finally got connected with an IRS business specialist, I got crucial information about how the reorganization would affect our quarterly estimated tax payments and some specifics about asset transfer documentation requirements. The agent walked me through what forms we'd need for the restructuring and cleared up some misconceptions I had about the parent-subsidiary reporting requirements.

I was extremely skeptical about Claimyr's service for getting through to the IRS. After weeks of frustration trying to get clarification about opco/holdco structures and QSBS implications, I reluctantly gave it a try. I'm shocked to admit it actually worked. After providing my info, I got a call back about 70 minutes later connecting me directly to an IRS business tax specialist. I was able to ask specific questions about how reorganization under Section 368 would affect my company's filing requirements. The agent walked me through exactly which forms we'd need to document the reorganization and how to properly disclose it on our returns. They also clarified the consolidated return requirements once we established the parent-subsidiary relationship. The information wasn't a substitute for professional tax planning, but it gave me confidence that our implementation plan would meet IRS requirements. Saved me a lot of uncertainty and potentially expensive mistakes in the restructuring process.

My accountant recommended calling it a "multi-entity structure" or "parent-subsidiary arrangement" rather than opco/holdco when talking to US tax professionals. That might be why you're seeing mostly Canadian results. Same concept though. Don't overlook state tax implications either. We have our holdco in Wyoming (no state corporate income tax) and our opco in our home state where we operate. Created some nice tax efficiency on the state level while still protecting assets.

Has anyone here actually completed a reorganization from a single C-corp to an opco/holdco structure while maintaining QSBS eligibility? What software or services did you use to track the reorganization?

This is a great question and one I've been exploring for my own business. From my research, the opco/holdco structure is definitely used in the US, though as others mentioned, it's often called "parent-subsidiary" or "multi-entity" structure here. One thing I'd add that hasn't been mentioned yet - consider the timing carefully if you have any plans for future fundraising. Some VCs prefer cleaner cap tables and might view the holdco structure as adding unnecessary complexity during due diligence. However, if you're planning to bootstrap or are past the fundraising stage, the asset protection benefits can be significant. Also, don't forget about potential franchise tax implications in your state of incorporation. Delaware, for example, charges franchise taxes for each entity, so you'll want to factor those ongoing costs into your analysis. The QSBS preservation is definitely the most critical piece - losing that eligibility could cost you millions in tax savings if you have a successful exit. I'd strongly recommend getting multiple opinions from tax professionals who specifically understand Section 1202 before proceeding.