Qualified Small Business Stock
A Qualified Small Business (QSB) is any active domestic C corporation whose assets don't go over $50 million on or after the issuance of stock.
Only certain types of companies fall under the category of a QSB. Firms in the technology, retail, wholesale, and manufacturing sectors are eligible as QSBs, while those in the hospitality industry, personal services, the financial sector, farming, and mining are not.
Qualified small business stock (QSBS) refers to shares of a qualified small business (QSB) as defined by the Internal Revenue Code (IRC).
QSBS is treated favorably for capital gains purposes if both the investor and the company meet certain requirements.
How much of a tax break the investor will receive depends on when they purchased the stock and how long they held it.
Investors who sell their QSBS before the end of the required holding period can defer capital gains by investing the proceeds in another company's QSBS.