Motivate angel investors to close by the end of the year with the Small Business Jobs Act

If you are raising money for your startup, here is some leverage you may be able to use to close your deal. The Small Business Jobs Act says that you can avoid capital gains tax on money invested in startups before the end of the year.

Here is the fine print:

• must not be a corporate investor
• to be qualified as a small business the company must be a C corp with less than $50 million in assets.
• stock must be purchase between Feb 17, 2009 and January 1, 2011 
• investor must hold the stock for at least five years

One key piece of leverage for an entrepreneur raising money is to have a "significant event" that forces investors to shit or get off the pot. This might be just the piece of encouragement you need.

You can download a summary of the act here.

What other ways have you found helpful in motivating angel investors to close?

Thanks to Mason Arnold for reminding me that the deadline was coming up.

Comments

[Cheap New Era Hats]

thanks nice post,and thanks sharing!!!!

[evan kastner]

For those of you who are rushing to close QSBS investments by year end: as of last Friday, this exemption has been extended through the end of 2011. It's also worth noting that these gains are also exempt from AMT (alternative minimum tax), which has traditionally been the gotcha for QSBS investments. Cheers.

[David Pope]

The stock must also be acquired at original issue (rather than purchased from an existing investor). There are other limitations as well - but it's a nice benefit if you meet all of the criteria.

For more info, look up "section 1202 stock."

[steve vandegrift]

I believe the deal needs to be an equity del to qualify (ie: not convertible debt)...steve