How QSBS Can Affect Small Businesses in Cincinnati

Starting and growing a small business can require a non-trivial amount of money. Even if a business is very careful with every dollar they spend, the cost of getting a business off the ground and then operating it can add up very quickly. Ensuring that there’s enough capital for growth is why many businesses choose to raise money. The tech press is regularly filled with stories of startups raising millions and millions of dollars. Although that type of fundraising may not make sense for a local business, there are very attractive options for smaller businesses that want to issue stock.

Regardless of whether a business is new or established, the most common method of raising money is to offer a percentage of the business in exchange for a specific amount. This transaction can be done by selling stock in the business. A common misconception about stock is it’s something that can only be purchased when a company is large enough to be traded on an exchange.

In reality, businesses of all sizes can sell private stocks to investors. And due to the federal government’s commitment to strengthening the economy through the expansion of small businesses, a program aimed at Qualified Small Business Stock (QSBS) provides a significant exemption.

This exemption, which was put into effect by the PATH Act, offers an exclusion of 100% of the gain on the sale or exchange of qualified small business stock acquired and held for more than five years. In terms of what qualifies as QSBS, a company must be a domestic C corporation that has gross assets of no more than $50 million at any time. Reputable tax services in Cincinnati, OH can help businesses structure themselves in this manner if that’s ultimately the best option for them.

By qualifying for this status, a small business can offer something to potential investors that should generate a significant amount of interest. While this arrangement can be very appealing, it’s also one that can be quite complex. That’s why it’s a very good to speak with a Cincinnati tax service before making any major decision.

There are a lot of elements to issues like Qualified Small Business Stock. Whether your business is interested in this specific topic or needs help with another financial topic, it’s always best to work with an experienced professional.