Recent Congressional Act May Be the Catalyst You Need to Secure Your Investor

If you have been “doing the dance” with a prospective investor who’s “almost there” with respect to investing in your company, we just received a tip worth sharing from Portland, Oregon law firm Roberts Kaplan that might be a positive tipping point for your negotiations.  Roberts Kaplan

Apparently, the US legislature recently adopted new Act that effects small business investments.  Within certain limitations (see some below), investments between September 27, 2010 and December 31, 2010 may qualify for a 100% exclusion of gain from the sale of small business stock.

From an investor’s standpoint, this could be HUGE and from an entrepreneur’s standpoint, anything that is this beneficial to an investor certainly has to factor positively in a decision to complete the deal.

The limitations on a qualifying deal may include:

  • Must be made before year-end
  • Company must be a C Corporation
  • Investment must be held for 5 years
  • Available only to non-corporate taxpayers
  • Direct /original issue by the C corporation (can be through underwriter)
  • The business must have assets of less than $50 million
  • The business must also use 80% of its assets in a qualifying active business (no financial institutions, hotels, restaurants, farms, professional service firms) for substantially all of the holding period

Again, this may be helpful in raising capital by year end if you have potential investor “on the fence”, but here’s where ActSeed provides its disclaimer:  While this interesting tip may be useful for you to explore, you should do it with an attorney and possibly even an accountant. 

If you don’t already have an attorney, the folks who shared this information with us may be able to guide you and one of their specialties is working with small businesses and startups around the USA.  For more information, contact Cliff Spencer at Roberts Kaplan: 503.221.0607.  ActSeed is not compensated for referrals, but as always, we want to continue our mission to bridge capital from where it resides to where it is needed.

0 thoughts on “Recent Congressional Act May Be the Catalyst You Need to Secure Your Investor

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  2. Karen Ann Barros
    on said:

    Hi,
    I have been trying for a while no to procure investor/s to my two companies, a non-profit and a profit. I have not been in business for five years. Can you help me?

    Blessings,
    Karen

  3. Bill Attinger
    on said:

    Karen,
    The Act doesn’t require your companies to have been in business for five years, but requires the investor to hold their investment in your company for five years to avoid the capital gains tax. The exclusions are noted in the bullet points and as the post mentions, you should really consult your attorney to make sure the deal is properly structured to take advantage of this law.

    Even if this law doesn’t benefit you for your two companies, ActSeed is a community where you can evaluate your “investment readiness” by joining the Entrepreneur Group and completing the evaluation profiles. By doing this, you will generate a series of scores that indicate your company’s level of preparedness. These same scores and general information about your companies are available to the constantly growing number of investors within the ActSeed community, plus, you can share your unique ActSeed link with investors you may know or find who are not yet part of ActSeed’s community.

    Investors will listen to a good business idea, but will only “bring their checkbooks” if they believe the founders have a solid plan and can demonstrate a high probability of successfully executing the plan. Here’s a video that illustrates this:
    http://bit.ly/WhatDoesItTake_ActSeed

    You can get started in the ActSeed Community by registering at http://actseed.com/registration.php

    We wish you the best of luck in getting your companies funded and launched!