First, the stock must be issued and acquired directly from the company. Not on a secondary market like a stock exchange or similar marketplace. And it has to come directly from the company where you invest. Second, you must have purchased the stock from the company with cash or property. Though you can also accept it as payment for a service. And you must NOT be a c-corporation as the investor. Individuals and things taxed as partnerships qualify (like LLCs, S-corps, LPs, etc). Third, I know you're thinking:. “Well, I'll just put this building in its own c-corp and sell it tax-free later.“. That doesn't work. >80% of the assets must be for the business or trade of the company. And only certain types of companies fall under the category of QSBS. Fourth, firms in the tech, retail, wholesale, and manufacturing sectors are eligible for QSBS. Hospitality like hotels or motels, personal services like law firms, financial corps, farms, and mining ventures don't qualify. Attached is from Sec 1202 itself on this. Fifth, the enterprise value (EV) of the company must have less than a $50mm fair market value when you invest. That's the size above which the IRS says you're no longer a small business. Most folks on here should easily be under that when buying/starting a new company. Sixth, for stock issued after 2010, you get a 100% capital gains tax exclusion up to the $10mm/10x greater of limit. It stepped up to 100% in the years before 2010. And, also, there is no limit. You can do it repeatedly per shareholder with independent corporations!