Although the financial crisis has taken a toll on small business funding all across the United States and the world, the environment may be getting a little more friendly to those looking to roll out their business startup. This is thanks to a provision in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.
Over the course of the past two years, there has been a lot of political attention given to small business owners. In speeches, roundtables and conferences, government officials have repeatedly proclaimed that America will recover one small business at a time, that small businesses are where the majority of new job creation takes place, and that small businesses are under pressure and need assistance to weather the difficult times.
The sad reality, though, is that very little help has arrived. Although organizations like the Small Business Administration have programs designed to get money in to the hands of the nation’s small business owners, money is still difficult to find and although new laws have been enacted, it’s difficult to find large amounts of thriving small businesses.
Now, though, there may be help. The little known provision in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 allows for 0% in capital gains tax for up to $10 million if the investors puts that money to work in a qualified small business. The law also eliminates most gains from the Alternative Minimum Tax, a tax often on the wealthy.
The hope is that angel investors will pull funds out of low income certificates of deposits and other ultra safe investment instruments and put it to work jumpstarting small businesses.
The stipulations of the law are first, the money has to be invested by the last day of 2011. Since the law has little chance of being renewed, now is the time to put the money to work so small business owners must get to those investors quickly to allow time for due diligence. Second, the business must be a standard C corporation. If your company is not a C corporation and you’re looking for angel investor support, consider contacting a business registration service and getting your business registered. Many investors like C corporations because the tax laws are more favorable.
Finally, not all businesses qualify for the investment although most do. At least 80% of the businesses assets must be used to conduct research or operate the business. Restaurants, real estate, and financial businesses may not qualify for this break.
Although not widely known, this stipulation, which awards investors for putting their money to work in a small business is welcome news for the nation’s entrepreneurs and if the business owner can find the funding, this should make the investment a lot easier to get.