Qualified Small Business Stock (QSBS) is a US tax provision (Section 1202) that allows early startup investors and employees to exclude up to 100% of capital gains from federal taxes upon sale.
Directly dictates the cap table and dilution structure during fundraising; understanding Qualified Small Business Stock helps founders model equity distributions when structuring rounds for tax optimization on startup exits.
Qualified Small Business Stock (QSBS) is a US tax provision (Section 1202) that allows early startup investors and employees to exclude up to 100% of capital gains from federal taxes upon exit.
The company's gross assets must not exceed $50M at the time of stock issuance, and the shares must be held for at least 5 years.
Up to $10 million in capital gains, or 10 times the taxpayer's basis in the stock (whichever is greater).
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