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Business Owners & Exit Planning

Building Value #6: Qualified Small Business Stock Exclusion

In this Building Value episode, Presilium explains the Qualified Small Business Stock (QSBS) exclusion under Section 1202, which can allow eligible founders and early shareholders to exclude a substantial portion of capital gains from federal tax when they sell. It covers eligibility basics and why owners should plan for it early.

Brook HartBuilding Value #6

In this Building Value episode, Presilium explains the Qualified Small Business Stock (QSBS) exclusion under Section 1202, which can allow eligible founders and early shareholders to exclude a substantial portion of capital gains from federal tax when they sell. It covers eligibility basics and why owners should plan for it early.

Key takeaways

  • The QSBS exclusion under Section 1202 can let eligible shareholders exclude a significant amount of gain from federal capital gains tax on a qualifying sale.
  • Eligibility depends on factors like the company's structure, asset size, holding period, and active business use.
  • Because requirements must be met well before a sale, QSBS planning should start early in a company's life.
  • QSBS can dramatically change after-tax proceeds, making it a key consideration in exit planning. Consult a tax professional for your specifics.
More on Business Owners & Exit PlanningTax Planning

Written by

Brook Hart

President & Chief Compliance Officer · CFP®, CEPA®

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