November 24, 2025

Overview: Predictability and Planning Under the OBBBA

The One Big Beautiful Bill Act (OBBBA) introduces a new era of predictability for business owners, founders, investors, and family offices by stabilizing several major tax provisions. Individual and corporate tax rates remain unchanged, the rules governing qualified small business stock (QSBS) and qualified opportunity zones (QOZs) are strengthened, and domestic research and development (R&D) expenditures once again benefit from full deductibility.

This article provides a legal analysis of the most significant OBBBA updates that impact individual business owners and investors.

What the OBBBA Changed—and What It Didn’t

Rates and Deductions That Remain Stable

The OBBBA preserves the existing 37% top individual rate, 21% corporate rate, and 20% capital gains rate. It also makes Section 199A permanent and leaves the carried interest rules intact.

Enhanced Deductions and Expensing

Key improvements include:

• Restoration of 100% bonus depreciation for personal property and certain real estate placed in service after January 19, 2025.
• Full domestic R&D expensing, retroactive to 2025 (and to 2022 for small businesses).
• Return to the EBITDA standard for interest deductibility, with capitalized interest still subject to §163(j) after 2025.

Permanent and Phasing Provisions

• The excess business loss limitation and the ban on miscellaneous itemized deductions are made permanent.
• Select clean-energy incentives are being phased down.
• SALT workaround structures, including pass-through entity tax (PTET) strategies, continue to be permissible.

Entity Choice in a Strengthened QSBS Environment

Selecting the appropriate business entity remains a fundamental tax-planning decision.

• LLCs offer single-level taxation, flexible allocations, profits interests, and seller-friendly outcomes in asset sales.
• C corporations become increasingly attractive for companies intending to utilize QSBS benefits—especially given the OBBBA’s expansions.

Hybrid structures, such as an LLC parent holding a QSBS-eligible C corporation subsidiary, may provide optimal flexibility. The right structure depends on anticipated investor composition, exit strategies, taxable income projections, and incentive-compensation plans.

QSBS Enhancements: Higher Caps and Faster Exclusions

The OBBBA notably expands the QSBS regime for stock issued after July 4, 2025. Key improvements include:

Accelerated Partial Exclusion

• 50% gain exclusion after a 3-year holding period
• 75% gain exclusion after a 4-year holding period
• 100% gain exclusion after a 5-year holding period

Increased Gain Exclusion Limits

The per-issuer cap increases to the greater of:

• $15 million (indexed beginning in 2027), or
• 10× the taxpayer’s basis in the stock.

Expanded Issuer Eligibility

The corporate gross assets test increases to $75 million, with annual inflation adjustments.

Ongoing QSBS Requirements Still Apply

Foundational constraints remain, including original issuance, active-business requirements, and avoidance of “tainted” redemptions. Transfers through gifts or certain partnership distributions may preserve QSBS status, while contributions to partnerships generally do not.

Businesses intending to capitalize on QSBS should consider converting to a C corporation early to begin the required holding period.

Qualified Opportunity Zones: Permanent Rules and New Benefits

Under the OBBBA, the QOZ regime becomes permanent, with updated mechanics for investments made after December 31, 2026.

Key QOZ Benefits

• Rolling 5-year deferral period from the investment date.
• 10% basis step-up when held for five years (30% for rural QOZ funds (QROFs)).
• Full fair-market-value (FMV) basis step-up after 10 years, eliminating gain on appreciation.
• 30-year maximum holding period, after which further appreciation becomes taxable.

Planning Considerations

Investments made under the original TCJA-era QOZ rules before December 31, 2026, will recognize deferred gain at year-end 2026, potentially creating a “dead zone” for 2025–2026 contributions. Coordinating exit timelines and adhering to new reporting requirements will be essential.

Exit Planning: Structuring for Maximum Tax Efficiency

Effective exit planning should begin well in advance—often six to nine months before a transaction.

Early Preparation Should Include:

• Financial cleanup and accounting readiness
• Sell-side quality of earnings (QoE)
• Contract reviews, consents, and IP housekeeping
• Compensation and organizational restructuring

Equity vs. Asset Deals

Buyers often prefer asset purchases, while sellers favor equity transactions.

• Flow-through entities (LLCs, S corporations) can often accommodate asset deals tax-efficiently.
• C corporation asset sales frequently trigger double taxation, making equity sales and QSBS qualification far more advantageous.

Representations and warranties (R&W) insurance can help bridge valuation and risk concerns.

Tax-Deferred Options

Common techniques include:

• Tax-deferred rollovers to partnerships or corporations
• Installment sales (with caution around depreciation-recapture rules)
• QSBS stock sales, which preserve exclusion benefits
• LLC parent entities holding corporate stock to manage indemnities and post-closing obligations

Practical Takeaways for Business Owners and Investors

1. Match Your Entity Structure to Your Exit Plan

If QSBS eligibility is viable, evaluate whether a C corporation structure—or a hybrid—optimizes long-term outcomes.

2. Explore Capital-Gains Deferral Opportunities

Updated QOZ rules, installment sales, and rollover transactions may all reduce or defer tax burdens.

3. Start Exit Planning Early

The OBBBA rewards proactive planning, rigorous structuring, and careful execution to maximize after-tax results.