The QOF can do the investment directly, but there are certain advantages to doing it through a QOZB. For example, the fund is subject to the 90% test, while the business is subject to a 70% test and can avail itself of the working capital safe harbor.
The QOF typically owns less than 100% of a QOZB, which serves as the operating entity. Owning 100% of the QOZB would make it a disregarded entity if the QOZB were an LLC, and a QOZB must be a tax corporation or a tax partnership.
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