Seeking investors is an all too familiar hurdle for many new companies. If a startup does not manage to entice the right investors, the company is often left to seek funding through bootstrapping or bank loans which may be hard to obtain. Without access to the right investors and capital, startup may not be able to grow and succeed. For business owners in Kansas, the Angel Investor Tax Credit may be the additional incentive that entrepreneurial companies need to attract investors.
The Kansas Angel Investor Tax Credit program offers an opportunity for certain investors in qualified startup companies to take a 50% tax credit for every dollar invested in a Kansas business certified by the Kansas Department of Commerce, up to $50,000 per business. Additionally, there is a limit of $250,000 per tax year per each Angel Investor. Those investors who wish to be considered for the tax credit must register as Angel Investors, just as those businesses wishing to become qualified Kansas businesses must apply. It is important to remember that even registered Angel Investors are not guaranteed a tax credit as the program is usually a first-come, first-served program. Thus, an investor may not be certain that he or she will receive a tax credit prior to making the investment.
Company Criteria The program is designed to help Kansas businesses in the early stages of financing and promote job growth in Kansas. Companies seeking certification must meet the following criteria:
1 The business has a reasonable chance of success and potential to create measurable employment within Kansas.
2 In the most recent tax year of the business, annual gross revenue was less than $5,000,000.
3 Businesses that are not Bioscience businesses must have been in operation for less than 5 years; bioscience businesses must have been in operation for less than 10 years.
4 The business has an innovative and proprietary technology, product, or service.
5 The existing owners of the business have made a substantial financial and time commitment to the business.
6 The securities to be issued and purchased are qualified securities.
7 The company agrees to adequate reporting of business information to the Kansas Department of Commerce.
The ability of investors in the business to receive tax credits for cash investments in qualified securities of the business is beneficial, because funding otherwise available for the business is not available on commercially reasonable terms.
The business will also be asked to provide an executive summary, business plan, company financials and other relevant information.
An Angel Investor is an individual or an owner of a permitted entity investor, who has a high net worth. This means that a) the individual’s net worth, or joint net worth with a spouse, exceeds $1,000,000 or b) the individual’s income is in excess of $200,000 in the two most recent years ($300,000 if joint with spouse) and the individual has a reasonable expectation of reaching the same income level in the current year. Anyone who serves as an executive, officer, employee, vendor or independent contractor of the certified Kansas business is not eligible for a tax credit for any investment he or she makes in that business.
More information on the program and how to apply can be found at Kansas Angel Tax Credits. If you believe that your business could benefit from the Angel Investor or are an Angel Investor seeking to invest, please contact Sheila Seck at firstname.lastname@example.org or call 913-815-8481.