Small Business Qualified Stock’s Tax Benefits

Certain tax benefits are available to those who start or invest in startups. It can be challenging to determine, however, if you’re eligible to do so, since not every founder or investor can take advantage of the same benefits.

One avenue for potential tax advantages is known as qualified small business stock. These apples to shares of a C corporation with less than $50 million in total assets at the time the investment was originally made. This means that other forms of businesses, such as partnerships, S corporations, and LLCs, do not qualify.

Eligible sectors for business include manufacturing and technology, but typically not professional services, finances, agriculture, and hospitality. In order to reap the possible tax-free benefits of the sale of this stock, the shares must have been held for at least five years from the date they were originally acquired. If these shares were gifted to you by someone else, the period that the other person owned them also counts towards the five-year plan.