Qualified Small Business Stock – Section 1202

Subscribe to Insights

Qualified Small Business Stock (QSBS) is one of the most advantageous provisions in the tax code. It refers to stock issued by a qualified small business that meets specific criteria outlined in section 1202 of the Internal Revenue Code. Investors who hold QSBS for more than 5 years may be able to exclude from gross income up from 100% of any capital gain realized on the sale of QSBS.

Withum’s team is well versed in QSBS requirements and can assist your Company with understanding eligibility and its needs. Withum can help with:

Deciding whether to remain in partnership or to incorporate to take advantage of QSBS in the future
Planning for founders of start-ups to ensure their stock qualifies for QSBS in the future
Assist in determining when and how to inform prospective investors if its stock is QSBS eligible
Advise shareholders that sold QSBS or are about to sell QSBS
Prepare tax returns to properly reflect an exclusion of gain under IRC Section 1202

Assist shareholders in avoiding state taxes that may apply on the sale of their QSBS
Assist shareholders that sold QSBS before the 5-year mark how they can engage in a "qualified rollover" transaction to preserve QSBS treatment on replacement stock
Prepare tax memos and/or financial analyses to help shareholders if audited by the IRS
Provide tax consulting around other QSBS situations

QSBS Quick Bites

Qualified Small Business Stock (QSBS) is one of the most advantageous provisions in the tax code. It refers to stock issued by a qualified small business that meets specific criteria outlined in Sec. 1202 of the Internal Revenue Code. Withum’s Founders and Tech Executives Services Team is here to help you and your company understand the eligibility requirements for QSBS as well as different strategies you can employ to maximize your tax savings.

Learn More

Realted Insights

View All Insights

FAQs on QSBS: Is Your Business Eligible?

Are you a founder, investor or executive wondering if your business qualifies for powerful tax savings under the Qualified Small Business Stock (QSBS) rules? With recent updates from the 2025 One Big Beautiful Bill Act, commonly referred to as the OBBBA or OB3, understanding your eligibility and maximizing your benefits is more important than ever….

Qualified Small Business Stock (QSBS): Do You Qualify and Why Does It Matter?

QSBS owners are exempt from capital gains up to a point. This article will discuss how to tell if your shares qualify for QSBS status, what your obligations are as a QSBS owner to achieve those benefits, and how QSBS can be a powerful estate planning tool that you can use to maximize the tax…

QSBS After the OBBBA: What Healthtech Startups and MSOs Need to Know

The MSO-PC model remains the prevailing structure in Healthtech, especially when navigating the restrictions of the corporate practice of medicine. Healthtech startups using MSO-PC models can structure their MSO entities to qualify for Qualified Small Business Stock (QSBS) treatment, while keeping the PC compliant with medical practice laws. The One Big Beautiful Bill Act, commonly…