Tax
QSBS (Qualified Small Business Stock)
Quick definition
Tax exemption for gains on qualifying startup stock held 5+ years.
Under IRC Section 1202, gains on QSBS held 5+ years can be excluded from federal tax (up to $10M or 10x basis). Founders and early employees should confirm QSBS eligibility at the time of grant — it's one of the most valuable tax breaks available to startup employees.
Related tax terms
R&D Tax Credit
Federal credit for qualified research expenses, usable against payroll tax by startups.
Delaware Franchise Tax
Annual tax for Delaware corporations, often quoted wildly too high if calculated incorrectly.
Nexus (Sales Tax)
The connection with a state that triggers a tax-collection obligation.
Section 83(b) Election
Tax election for restricted stock holders to be taxed on grant-date value instead of vesting value.
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Frequently asked questions
- What is QSBS (Qualified Small Business Stock)?
- Under IRC Section 1202, gains on QSBS held 5+ years can be excluded from federal tax (up to $10M or 10x basis). Founders and early employees should confirm QSBS eligibility at the time of grant — it's one of the most valuable tax breaks available to startup employees.
- Why is QSBS (Qualified Small Business Stock) important for startups?
- QSBS (Qualified Small Business Stock) is a tax concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does QSBS (Qualified Small Business Stock) belong to?
- QSBS (Qualified Small Business Stock) is a Tax term in the StartupCFO finance glossary — alongside other tax concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about QSBS (Qualified Small Business Stock)?
- Beyond this definition, see the related tax terms below, or explore StartupCFO's insights and tools that put QSBS (Qualified Small Business Stock) in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
Service spotlight
Planning a QSBS-eligible exit?
Our tax team handles §1202 elections, basis tracking, and §1045 rollovers — and runs the math state-by-state so you know exactly what you'll owe.
