How to Plan for and Claim the Credit In order to be an eligible qualified business the company must file an application with the state of Georgia and be approved before the investment is made. Although there is a limit on the amount of credits that are allowed to be issued per year, the first two years saw claims of less than 3 and 7 percent, respectively, of the total credits allowed. Investors must apply for the credit between September 1 and October 31 two years after the investment is made.
The credit allows a reduction of tax owed to the state of Georgia dollar-for-dollar until the entire amount has been used or there is no longer any tax owed. A qualified investment is cash for stock, equity interest, or subordinated debt in a corporation, partnership, or LLC. Doing this will increase your attractiveness to potential investors and allow your business to remain qualified for one year after the date of approval. The investment cannot be subject to any commissions or other remuneration for the solicitation of the investment no middle men. What is surprising is the dearth of businesses and investors that have taken advantage of this benefit. Also, the business must be primarily engaged in one of the following business lines: If you are a Georgia start-up that qualifies based on the conditions mentioned below, we recommend that you register your business immediately so that any potential investments would be eligible. How to Plan for and Claim the Credit In order to be an eligible qualified business the company must file an application with the state of Georgia and be approved before the investment is made. What is a Qualified Business? Although there is a limit on the amount of credits that are allowed to be issued per year, the first two years saw claims of less than 3 and 7 percent, respectively, of the total credits allowed. This is an extremely low number for the amount of activity occurring in Georgia and means that significant tax credits are being missed. More about the Angel Credit The Qualified Investor Tax Credit is designed to incentivize investors to support start-ups located within the state of Georgia. Becoming a qualified business could make a start-up more attractive to potential investors who would like to invest in a new company but want to reduce part of their out-of-pocket risk. For investments made during , the investor would be eligible to claim the credit in to offset any tax owed in that year or the five years following. The investor cannot be compensated by the company in any way for two years after the investment; however, they are allowed to participate in a stock option plan. The investor is also allowed to serve as an officer, director, or manager of the company. Investors should consult with their tax advisor prior to making an investment to ensure that they are taking the necessary precautions to be eligible for the credit. If a start-up ceases operations, dissolves, sells, or merges, the investor could still be eligible for the credit depending on the situation. Therefore, planning is important for an investor that wants to retain their eligibility for the credit. Investors must apply for the credit between September 1 and October 31 two years after the investment is made. Before making an investment there are some important things that investors should know in order to retain their eligibility for the credit. On the bright side, the low percentage of start-ups applying should ease any fears of the allowed credits running out and taxpayers receiving a reduced credit. With the surge of start-ups and innovation centers being established in Georgia it comes as no surprise that the state recently renewed the Angel Credit for another three years. You can also reach him by phone at What is a Qualified Investment? A qualified investor can be an individual or pass-through entity that is accredited by SEC standards. While the primary qualifications for investors, investments, and businesses are listed above, there are other qualifications that must be met depending on the investor or the business.
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