Changes to QSBS and potential impact on deal structure?

July 08, 2025
by an investor from University of Delaware in Boca Raton, FL, USA
Given the changes to Qualified Small Business Stock rules under the “Big Beautiful Bill” (please see below), does anyone have thoughts on or has anyone modeled out whether it is now more efficient to structure acquired businesses as a C-Corp instead of the more traditional LLC? You would have to pay taxes on generated profits under the C-Corp but if it is a possible exit some time between years 3-5 you would get the benefit of some significant tax breaks on the actual sale. I am curious if anyone has modeled out the breakeven points in terms of profitability and timing of exit where it now becomes better to be a C-Corp. Thank you.
Key QSBS Enhancements in OBBBA (effective July 4, 2025)
1. Reduced Holding Period (Tiered Exclusion)
o 3 years → 50% gain exclusion
o 4 years → 75% exclusion
o 5+ years → 100% exclusion (as before) en.wikipedia.org+12frostbrowntodd.com+12lewisrice.com+12bipc.com+4gibsondunn.com+4mintz.com
from Stanford University in Healdsburg, CA 95448, USA
from The Johns Hopkins University in Gainesville, FL, USA