Small businesses are an important part of the economy and make up more than 99.7 percent of all employers. Congress has recognized the importance of small businesses to the economy, and in 2015 passed the Protecting Americans from Tax Hikes (PATH) Act. For a long time Congress has permitted people to exclude from their income some (or all) of the gain obtained from selling qualified small business stock. This new law will make that gain 100 percent excludible and the exclusion will now be permanent. Small business owners have welcomed the new policy and hope it will help attract more investment. This article explains the conditions that small businesses must meet to take advantage of this exclusion. It also goes into explaining the difference between an LLC and a C Corporation. There is risk involved in this type of investment which is why trust advisers can help play an important role in offering guidance.
See Jason Erb and Mark Luscombe, Federal Tax Exclusion for Small Business Investment Here to Stay, Accounting Today, April 19, 2016.
