Liquidation & exit
What is QSBS (Qualified Small Business Stock)?
Section 1202 lets shareholders exclude up to $10M (or 10x basis) of federal gain on the sale of qualifying stock held more than 5 years.
Qualified Small Business Stock (Section 1202 of the IRC) is one of the most valuable tax provisions in startup investing. If you hold stock issued by a qualifying C-corp (under $50M in assets at issuance, qualifying industry, original issuance not secondary) for more than 5 years, you can exclude up to the greater of $10M or 10x your basis from federal capital gains at sale. State conformity varies - California, NY, NJ, PA notably don't conform, so state tax still applies.