Rob Walling

For those who aren't familiar, QSBS is a U.S.

tax benefit that applies to eligible shareholders of a qualified small business.

So it's Qualified Small Business Stock.

And this is a United States IRS entity.

exclusion or a you know whatever a federal government exclusion from taxes and i'm not a lawyer nor an accountant so google this or ask chat gpt but the general idea is if you own shares in a company and that includes founders and you sell for less than a certain amount and you hold those shares for five years or longer you pay no federal income tax on that sale and

And the limit used to be really low.

It used to be $10 million.

And in July of 2025, it was raised to, I believe, $15 million.

And you have to hold it for five years or longer.

But if you only hold it three years, you get a 50% exclusion.

If you hold it for four years, you get a 75% exclusion.

Five years gives you the 100%.

So the idea here is taxes in the US are not great.

And, you know, even long term capital gains taxes can hit you for 20% if you sell millions of dollars, plus there's a 3%.

this, and then you have state taxes, and you have all this stuff.

But to be able to sell a company and to not pay federal capital gains tax is a big deal, and it'll save you money.

Now, the question is about whether Ryan and his co-founders should go with a C Corp or an S Corp, because you only get the exclusion if you are a C Corp.

And the answer really truly is it depends.

Do you think you're going to hold the company for at least three years?

Because even that 50% exclusion, imagine selling it for $10 million and not paying federal tax on $5 million of that.