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The Hultquist Blog

Do You Have a “Qualified Business” for the Angel Investor Tax Credit?

In 2013, South Carolina passed the High Growth Small Business Job Creation Act, otherwise known as the Angel Investor Act.  This Act allows angel investors a South Carolina state tax credit on up to 35% of its qualified investment in a “qualified business.”

From an investor standpoint this is a great deal…and it is a great deal for new businesses as well.

However, from what I can tell, there are many more start-up businesses in South Carolina that are not becoming qualified businesses because they either don’t know what to do or they don’t even they can do it.

First of all, a qualified business has to register with the South Carolina Secretary of State to be registered as such.  If they don’t register, they are not a qualified business, plain and simple.

 

Here are the requirements to be a “qualified business:”

  • The business must be a corporation, limited liability company, general partnership, or limited partnership located and headquartered in the state of South Carolina.
  • The business must have been organized for no more than five years before the qualified investment was made.
  • The business must have 25 or fewer employees.
  • The business must have had a gross income of $2 million or less in any complete fiscal year before registering as a qualified business.

 

The business must also be primarily engaged in one of the following activities:

  • Manufacturing
  • Processing
  • Warehousing
  • Wholesaling
  • Software development
  • Information technology services
  • Research and development
  • Ambulatory health care services
  • Hospitals
  • Nursing and residential care facilities

 

The business also must not substantially engage in any of the following activities:

  • Retail sales
  • Real estate or construction
  • Professional services
  • Gambling
  • Natural resource extraction
  • Financial brokerage, investment activities, or insurance
  • Entertainment, amusement, recreation, or athletic or fitness activity for which an admission or fee is charged

 

Most people think that to qualify as a qualified business, they must be a high-tech or software company, but that couldn’t be further from the truth.

Many start-up businesses in South Carolina may qualify for this lucrative benefit…but they just need to simply look into it and apply…

And doing so may provide them with an extra edge in attracting capital.

For more information on the Angel Investor Credit, including application forms, visit the SC Secretary of State website.

You can also get more information from VentureSouth

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