SingerLewak Highlights Qualified Small Business Stock as Major Tax-Saving Opportunity for Founders and Investors

Tax advisors urge early planning to preserve potentially millions in federal capital gains exclusions

LOS ANGELES, CA, UNITED STATES, February 1, 2026 /EINPresswire.com/ -- SingerLewak is calling attention to one of the most powerful tax incentives available to entrepreneurs and early-stage investors: Qualified Small Business Stock, or QSBS.

Under Section 1202 of the Internal Revenue Code, eligible shareholders may exclude a significant portion, and in some cases up to 100 percent, of capital gains from the sale of qualifying stock, provided strict requirements are met. When properly structured, QSBS can dramatically increase after-tax exit proceeds for founders, early employees, and venture investors.

QSBS rewards long-term investment in U.S. growth companies, but the window to qualify often opens years before a transaction is even on the horizon. Entity choice, capitalization, and operational decisions made early in a company’s life cycle can determine whether this benefit is preserved or lost.

Why QSBS Matters

For most business owners, taxes represent one of the largest costs of a liquidity event. Federal capital gains taxes alone can approach 20 percent or more, with state taxes adding further pressure. QSBS can significantly reduce that burden by excluding qualifying gains entirely, increasing proceeds without altering the economics of a transaction.

Who May Benefit

QSBS generally applies to non-corporate shareholders, including: Founders; Early-stage investors; Employees receiving equity compensation; Certain trusts and estates.

Corporate shareholders are typically not eligible, making ownership structure a critical planning consideration.

Key Requirements to Qualify
C Corporation status. QSBS applies only to stock issued by domestic C corporations.
Original issuance. Shares generally must be acquired directly from the company.
Asset size limits. The company must meet specific thresholds when stock is issued.
Active business use. Most assets must be deployed in an operating business. Certain professional service firms are excluded.
Five-year holding period. Shareholders typically must hold stock for at least five years to receive the maximum benefit.

Common Pitfalls

Companies and investors frequently lose eligibility due to selecting entity structures without exit planning in mind, issuing equity without tracking QSBS qualification, shifts in business activity that disqualify the company, and discovering QSBS opportunities only after a sale process begins.

Early Planning Is Essential

QSBS strategies are most effective when tax advisors are involved during formation, early funding rounds, and major ownership changes. Maintaining documentation and regularly reassessing eligibility can protect this valuable benefit and prevent unpleasant surprises at exit.

About SingerLewak

SingerLewak is a leading accounting and advisory firm providing tax, audit, and consulting services to organizations nationwide. The firm works closely with founders, investors, and growth-stage businesses to evaluate QSBS eligibility, identify planning opportunities, and position clients for tax-efficient exits.

If you are building or investing in a company with long-term growth in mind, SingerLewak encourages making QSBS planning part of the
conversation early.

Jason Borkes
SingerLewak
+1 949-623-0516
email us here

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