Founders & Investors: Keep up to $15M in gains, tax-free under new law

Series Episode 14 | One Big Beautiful Bill

Launching, or planning to launch, a C Corporation with the goal of selling in the future? The One Big Beautiful Bill Act, signed into law on July 4, 2025, just introduced a game-changing update to the Section 1202 Qualified Small Business Stock (QSBS) capital gains exclusion.

This update gives founders, early investors, and even employees with equity greater flexibility, higher caps, and shorter holding periods, potentially saving millions in taxes.

What Changed Under the New Law

Shorter Holding Periods

• Exclude 50% of capital gains after just 3 years
• Exclude 75% of capital gains after 4 years
• Exclude 100% of capital gains after 5 years
  (Applies to stock acquired after July 4, 2025)

Higher Exemption Cap

• Exclusion cap increases from $10 million to $15 million per issuer
• Indexed for inflation beginning in 2026

Bigger Eligibility Window

• Businesses with up to $75 million in gross assets now qualify
• (Up from $50M under prior law)

Why This Matters

Imagine founding a C Corporation, holding stock for just four years, and then selling it tax-free up to $15 million. Depending on your basis, you could even qualify for the 10× investment rule, an incredibly powerful exit strategy that incentivizes innovation and reinvestment.

For high-net-worth entrepreneurs and investors, these changes create an unprecedented opportunity to plan for tax-efficient growth and liquidity events.

• These new QSBS rules apply only to stock issued after July 4, 2025.
• Pre-existing stock remains under the old QSBS rules, which require a five-year holding period and have lower exemption caps.

Planning your equity structure correctly today can make the difference between paying millions in capital gains taxes, or keeping them tax-free.

Next Steps: Build Your Exit Strategy with Leader CPA

Structuring a C Corporation under the new QSBS rules requires foresight and precision.

Ready to design your path toward a tax-optimized exit?
Contato Leader CPA to develop a tailored strategy, whether you’re an investor, founder, or employee with equity.