Expanded Tax Break in GOP Law Has Startups Talking Restructuring

Tax attorney Brandon Bloom was cited in a Bloomberg Tax article exploring how business leaders and entrepreneurs are responding to enhanced tax benefits for holders of Section 1202 Qualified Small Business Stock (QSBS) enacted in 2025's One Big Beautiful Bill Act. The provision allows founders and early investors to avoid capital gains tax on certain stock sales, and the law expanded this benefit in three ways: decreasing the length of time to hold the stock to qualify from five years to three years, increasing the asset threshold from $50 million to $75 million, and increasing the cap on the break from $10 million to $15 million. Coupled with a lower corporate tax rate, the changes have founders contemplating restructuring from a passthrough entity to a C corporation, the only type of business that can qualify. Others are considering more creative ways to take advantage of the benefits, from establishing C corporation subsidiaries to redoing financing schedules to stay under the $75 million limit. Mr. Bloom said these examples show how the law "just added another compelling reason to be a C corp."

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