QSBS (qualified small business stock)

Definition

A federal rule that can exempt gain on stock in a small C corporation.

Why It Matters

This is a tax question to ask before closing, not at exit, because eligibility turns on how the purchase was structured years earlier: the company has to be a C corporation, the shares have to be issued to you rather than bought from somebody else, and there is a holding period to clear. Most acquisitions at this size are asset purchases by a pass-through, and none of that qualifies. The reason to know the name is to ask an advisor early whether the structure in front of you forecloses it, since asking then costs nothing and it cannot be fixed later.

In numbers: The exclusion runs to the greater of $10M of gain or ten times what you put in, which on a business bought for $4M is the second by a distance.