Selling your business is a big moment. It can mean financial security, freedom, or a new beginning. It can also be a missed opportunity. Smart owners plan well in advance. They build value and preserve wealth. They use every tool the tax code offers.
In 2025, the One Big Beautiful Bill Act (OBBBA) unlocked new opportunities, including powerful changes to Section 1202’s qualified small business stock (QSBS) rules.
Begin with a clear goal
Know what you want from your sale. Do you seek the maximum price? A smooth transition for your team? A fast exit? Or you may want to preserve your legacy. Clarity guides decisions later. It helps your advisors stay aligned.
Obtain an independent valuation
You need a realistic number. Hire a valuation expert. Know what drives value. Learn where your business is weak.
The valuation removes emotion and gives you leverage in talks.
Clean up your financials
Addressing operational gaps is crucial for any business looking to enhance efficiency and sustainability. Here are some practices to implement:
When potential buyers evaluate a business, they often look beyond profits. They seek well-established systems and skilled personnel. Investing in effective processes and training ensures your business is appealing and operationally sound.
Creating detailed documentation of your core processes helps streamline operations and ensures consistency. This documentation serves as a reference for current staff and a training tool for new hires, minimizing dependency on key employees and promoting a culture of standardization.
Developing the leadership skills of your managers is essential. Providing them with the necessary training enables them to lead teams effectively, make informed decisions, and tackle challenges head-on. Strong management is a key pillar that supports operational stability and growth.
Focusing on generating recurring revenue can stabilize cash flow and reduce the volatility of business income. This might involve adopting subscription models, maintenance contracts, or loyalty programs, encouraging repeat business, and fostering long-term customer relationships.
Relying heavily on a limited number of customers can pose risks. Diversifying your customer base can mitigate the impact of losing a few key clients. Exploring new markets, improving customer outreach, or expanding service offerings can help distribute risk more evenly.
Addressing these areas can enhance your business’s operational efficiency, appeal to potential buyers, and position yourself for long-term success.
Use QSBS changes under the OBBBA
Section 1202 of the Internal Revenue Code refers to QSBS, which provides tax benefits to investors who hold stock in qualified small businesses. Under Section 1202, investors can potentially exclude a significant portion of the gain from the sale of QSBS from federal income taxes, provided specific criteria are met.
What’s changed?
The OBBBA expanded Section 1202 in several important ways:
Gains exclusion : Under OBBBA, the exclusion cap for QSBS acquired after July 4, 2025, has been raised to $15 million per taxpayer per issuer, on a lifetime basis. The previous $10 million cap still applies to QSBS issued on or before July 4, 2025.
Holding period phase in exclusions : OBBBA also introduces a graduated exclusion, allowing for partial benefits based on the holding period of an asset.
For QSBS acquired after July 4, 2025, if the stock is held for at least three years but less than four, a 50% gain exclusion applies. For holding periods between four and five years, the exclusion increases to 75%. Once the five-year holding period is met, a complete 100% exclusion is available.
Gains that qualify under the 50% or 75% exclusion tiers are not treated as Alternative Minimum Tax (AMT) preference items.
Gross assets threshold: The aggregate gross assets limit for a corporation to qualify as a QSBS issuer was increased from $50 million to $75 million, applicable to stock issued after July 4, 2025. The limit will be adjusted for inflation beginning in 2027.
Plan entity structure with QSBS in mind
QSBS only applies to C corporations. If your business is an S corporation or LLC, consider converting to a C corporation, especially considering the raised asset threshold. Plan stock issuances so they qualify after July 4, 2025.
Converting to a C corporation has several downsides, including double taxation on profits, potentially higher tax rates, uncertainty with future tax laws, difficulty converting back to an S corporation, and restrictions on the cash method of accounting.
The decision to convert to a C corporation should only be made with the assistance of qualified tax professionals.
Use trusts and intra-family transfers to maximize the benefit of OBBBA and QSBS
The OBBBA increased the federal gift and estate tax exemption to $15 million per individual (or $30 million per married couple) beginning in 2026, with the amount indexed for inflation from a 2025 base year. This creates a powerful window of opportunity for transferring appreciating assets, especially Qualified Small Business Stock (QSBS), into the hands of heirs with minimal tax exposure.
One highly effective strategy is to transfer QSBS into irrevocable trusts early, while the shares are still relatively low in value. Doing this can:
- Lock in valuation discounts for lack of control and marketability (often ranging from 20% to 40%).
- Remove future appreciation from your estate.
- Preserve the QSBS holding period so the beneficiaries can qualify for the full Section 1202 exclusion. The trusts must be non-grantor trusts to be treated as separate taxpayers and multiply the gain exclusion.
This can be accomplished using a variety of trust structures:
- Grantor retained annuity trusts (GRATs) : Useful if the QSBS is expected to appreciate significantly.
- Spousal lifetime access trusts (SLATs) : Allow a spouse to access income or principal while removing assets from the estate.
- Dynasty trusts : Ideal for multigenerational wealth transfer. A dynasty trust can hold QSBS long-term and shelter future appreciation from estate tax.
Because the QSBS exclusion is per taxpayer per issuer, trust-based planning may allow families to multiply the $15 million gain exclusion across multiple beneficiaries or trusts.
Incorporating QSBS into your estate plan under the new OBBBA framework could produce extraordinary tax savings. These strategies should be implemented well before any liquidity event (like a sale or IPO), and always under the guidance of a tax attorney or estate planning expert experienced in QSBS structuring.
Structure the sale
Decide whether to do an asset sale or a stock sale. Stock sales are QSBS-friendly. Timing matters. If you can hold for three or four years, you still get partial QSBS benefits. That can drive structure choices like earn-outs or installment deals.
Coordinate with estate and financial planning
Selling changes everything. If QSBS yields tax-free gains, invest and set up your estate. Work with your wealth advisor. Update estate documents. Think about liquidity and legacy.
Assemble the right team
You’ll need:
- A CPA experienced in mergers and acquisitions and QSBS.
- A transaction attorney.
- An estate planning attorney familiar with trusts and QSBS.
- A valuation expert.
- A wealth advisor.
Coordination is critical.
Start years ahead
The OBBBA QSBS changes are powerful. But they only help if you plan early. You need time to issue qualifying stock, hold three to five years, and align estate moves. To maximize QSBS, start planning three to five years before sale.
