Medium and Large-Sized Small Businesses Recovering from Pandemic, QSBS Investors Must Evaluate Risk

Small Business QSBS

High-Risk and High-Reward Surrounding Small Businesses

As weekly IPO records are reported and the looming tax hike for capital gains rates is debated, investors are turning more and more to small businesses for a high-risk, high-reward financial strategy. We’ve seen a staggering bounce-back from the pandemic with more than 11 states lowering their state income taxes and more businesses opening their doors. See the latest QSBS News article on the 11 sates lowering income taxes.

Optimistic Recovery of Small Businesses

Kabbage, an American Express Company which offers small business financial solutions, has released the third installment of their Small Business Recovery Report which shows optimistic recovery for certain types of small businesses. 

In all, small businesses are experiencing about 80% of the sales numbers that they saw pre-pandemic, but with closer evaluation, the report shows now all small businesses are seeing the same levels of success. Medium and large-sized small businesses are reporting sales at 90% of their pre-pandemic numbers while the smallest businesses (less than 20 employees) are only seeing 55-57% of their expected sales numbers. 

Even though doors are opening and mandates are weakening, small businesses are still doing substantial business through ecommerce as American shopping habits have evolved over the past year. The smallest businesses may not be able to keep up with this industry transformation. 

Medium and large-sized small businesses are also better equipped to power through the hiring crisis that all small businesses are facing. Understaffed businesses suffer deeply and the less staff you have to begin with makes it even harder to cope with those kinds of setbacks. 

As investors seek to protect their capital gains by understanding QSBS and the associated benefits, such as up to 100% exemption on the sale of qualified stock, these statistics can be crucial in minimizing risk and maximizing reward. Medium-sized small businesses, classified as 20 – 100 employees, and large-sized small businesses, 100 – 500 employees, are seeing remarkable comeback as we heal from 2020 and evolve to meet current market needs. 

Visit our webpage to learn more about the criteria you should consider when exploring QSBS.

This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.

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