What is Qualified Small Business Stock?
Qualified Small Business Stock
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.
Why It Matters for Startups
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.
Detailed Deep Dive
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.
Frequently Asked Questions
Q:What are the main requirements for QSBS?
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.
Q:How much tax can be excluded under QSBS?
Up to $10 million in capital gains, or 10 times the taxpayer's basis in the stock (whichever is greater).
Quick Facts
- CategoryFunding
- Key ApplicationTax optimization on startup exits
Coverage Trend12 Weeks
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