Why Now Is the Time to Seek Investors

Everybody knows how difficult it is to get a loan from a traditional bank right now, particularly for start ups.  The government realizes this problem and has created a program in hopes of providing other possibilities for small businesses.  It’s a plan that allows investors who hold onto qualified stock for at least 5 years to pay NO TAXES on their gains.  The idea is to incent investors to provide seed money or even working capital to small businesses. Yes, there are rules about what kind of stock (and classifications of businesses) apply and it’s only in place until the end of this year, so read the article below quickly!

Author: Barbara Weltman

Source: The Wall Street Journal, August 1, 2011

Need funding for your business? Thanks to a special tax break, now’s the time to seek a cash infusion from a private investor. There’s a catch though: The window to use the break closes on Dec. 31, and the opportunity might never come around again.

Here are the details:

No Tax on Profits

An individual—an investor, a current owner, an employee—who acquires qualified small business stock and holds it for more than five years pays no tax on gain. Say you are starting a technology business now and find an angel investor. As long as you close the deal before the end of the year and the investor hangs on until 2016 (after holding the stock for more than five years), the investor can sell and pay zero tax on his or her profits.

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