A bill proposed in Congress last week would make it easier for small corporations to raise money through crowdfunding.
U.S. Reps. French Hill (R-AZ) and David Schweikert (R-AZ) introduced H.R. 531, the S-Corp Access to Crowdfunding Act, which would amend the tax code to lift certain restrictions placed on S-Corps, a special type of corporation created through an IRS tax election that is allowed to avoid double taxation, once to the corporation and again to the shareholders.
The bill would allow S-Corps to more easily access capital from crowdfunding – raising small amounts from multiple investors – or small public offerings.
Specifically, it makes an exception to the 100 shareholder S corporation limitation where in the case of shareholders whose shares were acquired through certain crowdfunding or small public offerings.
“The long-term success of any company is linked to its ability to raise the money needed to grow their operations. As House Republicans formulate our plans to restructure tax law in this country, we need to make sure that we are taking into account the problems and concerns of businesses of all sizes,” said Hill. “The bill would eliminate a roadblock in the tax code so that all businesses can utilize these new cost-effective methods for raising capital.”
“As crowdsourcing in capital becomes a more robust opportunity for our small businesses, archaic legacy rules need to be brought up to date for today’s capital environment,” Schweikert said.