Only C-Corporations can qualify to issue Qualified Small Business Stock (QSBS) per Section 1202.
C-Corporations or “C-Corps” are legal entities in which the owners or shareholders are taxed separately from the entity. C-Corps are taxed on their income before paying out earnings in the form of dividends to shareholders, and those distributions are then taxed at the individual shareholder level – creating “double taxation”.
S-Corporations on the other hand are considered to be “pass-through” entities as they pass income directly to shareholders. Income taxes are therefore only assessed at the individual partner level.
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.