QSBS: overlooked Opportunity for Non‑Tech Founders

Does your Business Qualify for QSBS

Most people assume QSBS, the tax rule that can eliminate up to $15M+ in capital gains, is a Silicon Valley thing. Something for software founders, venture‑backed startups, and tech insiders.

But that assumption is wrong.

QSBS applies to far more than tech, and many of the industries that qualify most easily are the ones least likely to know about it. If you’re building a consumer brand, manufacturing a product, developing hardware, or creating anything physical, you may be sitting on one of the most powerful wealth‑building tools in the U.S. tax code.

And most founders in these sectors have never heard of it.

What Is QSBS?

QSBS (Qualified Small Business Stock) is a federal tax incentive under IRC §1202 that allows founders and early investors to potentially exclude up to:

• $15 million in capital gains, or

• 10× their investment

…whichever is greater.

Does your Business Qualify for QSBS?

The stock must be:

• Issued by a U.S. C‑corporation

• Issued when the company has $50M or less in assets

• Held for 5 years

• Part of an active business (not a passive investment or service‑based profession)

That last requirement is where non‑tech industries shine.

QSBS Is Not Just for Tech — Here’s Who Qualifies

The IRS doesn’t limit QSBS to software or venture‑backed startups. What matters is whether the business is “active” and not in one of a few excluded service categories.

This means many non‑tech sectors are fully eligible, including:

• Product‑Based Consumer Brands

• Food, beverage, beauty, supplements, home goods, pet products if you make or sell a physical product, you’re likely in QSBS territory.

• Manufacturing

• Apparel, industrial equipment, packaging, specialty materials manufacturing is one of the clearest QSBS‑friendly categories.

• Hardware & Devices

• Medical devices, robotics, wearables, IoT hardware even if there’s tech inside the product, the business itself is not a “service business.”

• Climate & Energy Products

• Solar equipment, battery systems, environmental products, energy storage hardware these companies often scale quickly and raise capital, making QSBS especially valuable.

• Agriculture & Food Production

• Vertical farming, packaged foods, agricultural equipment rarely thought of as “startups,” but fully eligible.

• Construction & Building Products

• Prefab components, smart building hardware, construction materials... if you make a product, QSBS likely applies.

Why Non‑Tech Founders Miss This

QSBS is widely discussed in tech because:

• Tech companies raise equity more frequently

• Venture investors know the rules

• Founders often incorporate as C‑corps from day one

But the law itself is industry‑neutral. A founder building a beverage brand or a robotics device has the same QSBS potential as a SaaS startup.

The result:

Thousands of non‑tech founders miss out on a tax benefit that could change their financial future.

The Benefit: Potentially Tax‑Free Exit Proceeds

Here’s the part that surprises almost everyone:

If your company qualifies and you hold your stock for 5 years, you may be able to sell your business and pay zero federal capital gains tax on the first $15M (or more).

For founders in consumer goods, manufacturing, or hardware, where exits often fall in the $10M–$100M range, the benefit is enormous.

A founder selling a company for $20M could save millions in taxes simply because they structured the business correctly at the start.

What Non‑Tech Founders Should Do Now

A few simple steps can preserve QSBS eligibility:

1. Confirm you’re a C‑corp: (QSBS only applies to C‑corporations

2. Track the $50M asset threshold : Your stock must be issued before the company exceeds $50M in assets

3. Document stock issuance clearly: QSBS requires proof of original issuance and holding period.

4. Educate early investors: Many angels and family‑office investors don’t know QSBS exists. Highlighting it can make your raise more attractive.

Q&A: Common Questions Non‑Tech Founders Ask About QSBS

1. Does QSBS apply to consumer brands or manufacturing companies?

Yes. QSBS applies to any “active business” that isn’t in an excluded service category.

Product‑based businesses: CPG, hardware, manufacturing, climate tech, can easily qualify.

2. What if my company isn’t venture‑backed?

QSBS has nothing to do with venture capital. You can qualify whether you raise from angels,

family offices, or no outside investors at all.

3. Does QSBS apply if I sell my company before raising a Series A?

Yes, as long as your stock was issued when the company had under $50M in assets and you held it for 5 years. Many non‑tech exits happen before institutional capital, and QSBS still

applies.

4. What if I started as an LLC?

You can convert to a C‑corp, but QSBS only applies to stock issued after the conversion. The 5‑year clock starts when the stock is issued.

The Bottom Line

QSBS is not a “tech tax break.”

It’s a product‑business tax break, a manufacturing tax break, a consumer brand tax break, a hardware tax break, and a climate tech tax break.

If you’re building something real. something physical, you may be sitting on one of the most powerful wealth‑building tools in the U.S. tax code.

And the best part...Most people in your industry don’t know about it yet.

Meliora Consulting PLLC | tax advisory