| December 18, 2013 | | | | |  | | | Become Your Own Venture Capitalist on a Shoestring Budget | | | - Who wants to play the million-dollar game... "If Only You Were Peter Thiel!"...
- Shake off your investment shackles: A look at an industry expected to skyrocket from zero to $300 billion in 2014 alone. (All because of changes in government policy… go figure)...
- Plus, Wayne Mulligan on the two words startup investors find more attractive than "The Next Google"... "The Next Facebook"... and how you can cash in on them...
|
| | | | | | | One Weird Trick To Cash In On U.S. Oil… Let me tell you about a weird trick people are using to exploit the energy boom happening in America. A trick that, for some reason, no one's talking about. That's a shame, because it could turn a tiny initial investment into your ticket to an early retirement -- for instance, George H. from Nevada was able to turn a measly $3,000 stake into $91,000 within months. Yet for some reason, most people overlook this profit multiplier. | | | | | | | | Addison Wiggin, winding back the clock nearly a decade...
 The year was 2004 and billionaire entrepreneur Peter Thiel decided to sow $500,000 into a small but growing startup. Facebook was its name... perhaps you've heard of it. It was the company's first angel investment. In return, Mr. Thiel was given a 10% stake and a seat on the board, where he took a back seat as his stake appreciated. When he sold, he reaped over $1 billion. Nice work if you can get it.
Alas, Thiel's story captures the zeitgeist of the past 80 years...
If you had sought out Facebook's bright-eyed and bushy-tailed Harvard undergrad and given him a measly $500 in 2004, do you know how much you'd be sitting on? A pile of money a million dollars high. Yet retail investors like you were locked out of private equity investments like it thanks to U.S. security laws.
That didn't stop us from asking the question on everyone's mind: "What if you could actually invest seed capital in a concept you believed in with your whole heart? What if you could be your own venture capitalist, risking a small chunk of your portfolio?"
Good thing we asked it, too... because of all things, government policy has unlocked the opportunity for you after almost a century-long ban. In 2014, you'll be able to invest directly in a neighborhood business or in that awesome garage startup down the street. 2014 will be the year of "equity crowdfunding."
We'd better clear up our terminology for starters. "Crowdfunding" already exists through sites like Kickstarter, where tiny startups give their best pitch for a product to people like you. If you're sold on the idea, you invest by way of ordering the product before it ever goes into production.
"Crowdfunding is turning into a huge business," writes our friend Wayne Mulligan, the founder of Crowdability -- a website that aggregates the best crowdfunding opportunities out there. "Research firm Massolution reported that in 2012, 308 crowdfunding platforms across the world raised $2.7 billion. Many predict that the market will reach $5 billion or more in 2013."
"Equity crowdfunding" is another animal altogether -- and potentially much more lucrative. Here, you're actually buying a stake in the nascent company. Up until now, such a privilege was limited by the Securities and Exchange Commission to "accredited investors" with a net worth of at least $1 million or a family income of at least $300,000. That's all changing with the passage of the Jumpstart Our Business Startups (JOBS) Act of 2012.
| Once the paper pushers finally get out of the way, the industry's potential is immense | "The act," Makers author Chris Anderson told us earlier this year in an interview, "makes it easier for small companies to use regulated Web-funded crowdfunding sites such as RocketHub, Crowdfunder and Launcht to raise up to $1 million in investment money from regular people."
The SEC was supposed to finish writing the regulations to implement the law by Dec. 31, 2012. Instead, the bureaucrats took almost an extra year, finishing on Oct. 23. Now, a 90-day public comment period is in effect. That should be wrapped up (fingers crossed) by the end of January.
Once the paper pushers finally get out of the way, the industry's potential is immense: If only 1% of long-term investment in the U.S. shifted to crowdfunding, that would be a $300 billion market -- 10 times the venture capital invested during 2011.
Skeptical? "You've got every right to be," says Wayne. "But keep in mind that before the emergence of online brokerage platforms like E-Trade, plenty of smart people thought average citizens would never go online to trade and invest in stocks. E-Trade's annual revenues today? More than $2 billion."
Cautiously optimistic, we make the following prediction: 2014 will be the year you can become your own venture capitalist on a shoestring budget.
The enthusiasm brewing for this new sector of the market "brings to mind the anticipation and wealth-building potential of being part of 'The Next Facebook' or The Next Google'," comments Crowdability founder Wayne Mulligan... below.
But as exciting as the idea of getting in on the ground floor of one of those companies is, Wayne has two words that you may find much sexier: "tax benefits". Read on...
[Ed. Note: We've been working with a new partner to make this crowdfunding forecast a self-fulfilling prophecy. If you're a member of the Agora Financial Reserve you should've received an invitation to join us already. If you missed it, look in your inbox. As a special incentive to check it out, $500,000 will be given away during a live event that airs tomorrow. You don't want to miss out.
On the other hand.. if you're not a Reserve member… don't fret. You will be receiving a full list of our new investment services and a year end discount to become a member soon. Keep your eyes peeled for your membership invitation… coming to your inbox soon.] | | | | | | | | | External Advertisement
The IRS Hates this Tax-Free Loophole
Instead of paying the IRS as much as 35%, what if you could invest it? You might make a fortune...
I've found a tax law loophole that will let you completely avoid income taxes on a terrific source of income. In fact, you won't pay capital gains taxes, either, even though your profits could be enormous!
It's a 100% legal way for you to collect thousands in tax-free income every year. In fact, this tax-free loophole is so powerful, it could have turned $10,000 into $220,425 in just 10 years — plus, you could be getting over $18,000 in tax free income a year.
| | | | | | | | The Daily Reckoning Presents…
| | | | Tax Benefits Are Just As Sexy As "The Next Facebook" | | | | by Wayne Mulligan | | | "Startup." Ah, what an exciting word…
It brings to mind the anticipation and wealth-building potential of being part of "The Next Facebook" or "The Next Google."
But for a handful of smart investors, the word "startup" conjures up something that's a little less world changing, but (depending on how you look at it) equally as sexy:
Tax benefits.
Yes, tax benefits.
This isn't widely known. In fact, a famous venture capitalist – someone who's been making successful early-stage investments for almost 30 years – recently said, "I have never taken advantage of them."
But it's right there in the tax code: investing in early-stage companies offers a way to cut hundreds, perhaps thousands, of dollars from your tax bill each year.
If you're actively making equity crowdfunding investments, you can do it right now. Today we'll show you how.
| Investing in early-stage companies offers a way to cut hundreds, perhaps thousands, of dollars from your tax bill each year. | When a company gets started, one of the first items of business is determining what type of "corporate structure" to use – for example, an LLC (Limited Liability Company), a Corporation, or a Partnership (LLP).
Each type has unique characteristics. LLCs and LLPs, for example, are known as "Pass-Through" entities. If the company earns a profit, those profits "pass through" to the individual owners from a tax perspective, and must be reported as personal income.
But here's where it gets interesting as it relates to early-stage investing. You see, profits aren't the only thing that gets passed through to individual tax returns… so do losses.
Let's say you recently invested in a startup that was structured as an LLC. Chances are, the company won't turn a profit for some time – they need to "invest" in their business now in order to generate future profits.
Sure, if a company loses money for too long, it'll go out of business. But for an early-stage startup, especially in the technology or consumer product area, running at a loss for a year or two is common.
As a shareholder in a loss-making LLC, you can apply those losses against your ordinary income. This is a tactic that can help shave thousands of dollars off your tax bill each year.
Check out CircleUp, which specializes in consumer product companies: many of the companies raising money there are structured as LLCs. | | | | | | |
| How to become invisible to "Big Brother's" domestic spy program
Imagine having a black bag of tricks, loop-holes, and work-arounds for overcoming Obamacare, increased taxation, a manipulated stock market, and the regulation creep that business owners face.
Our panel of insiders have devised a legal, but sneaky set of solutions to help you reclaim your privacy from the NSA, opt out of Obamacare, and make a bundle from little-known investment and small business opportunities. | | | | | | | | Most of the tech companies raising money on platforms like AngelList and WeFunder, however, are "Corporations." So this tax loophole won't help you there.
But guess what: we're also going to show you a way to save on taxes with Corporations as well…
All publicly traded companies – Coke, Google, McDonald's, etc – are corporations. And corporations don't have "pass through" income or losses, which is why you won't receive a tax benefit if McDonalds suffers a quarterly loss.
For startups that are corporations, the tax issue doesn't generally come up until the company is acquired. At this point, assuming the value of your stock has gone up, you'll be taxed at the capital gains rate – either the short term or long term rate depending on how long you've owned the stock.
The short term rate is almost double the long term rate. But here's the thing: there's a way to avoid paying either – or at least, defer paying either.
Sections 1202 and 1045 of the Federal Tax code deal with something known as Qualified Small Business Stock (QSBS). These rules were put in place to incentivize taxpayers to invest in small businesses. You can go to the IRS website to read more, but here's the gist:
| If you take that $100,000 and invest it into another start-up (or several start-ups), no taxes are due. | If you own stock in a company that's worth less than $50 million at the time you bought it, that stock is considered QSBS.
If your QSBS stock is acquired for a profit, you can avoid paying taxes on it if you invest your profit into another early-stage investment. Let's look at an example:
Let's say you invested in a start-up a few years ago. The startup was recently acquired, netting you a profit of $100,000.
If you take that $100,000 and invest it into another start-up (or several start-ups), no taxes are due.
On top of that, if you hold your QSBS for more than 5 years, Section 1202 allows you to avoid paying capital gains taxes on 75% to 100% of your gain!
Obviously you'll want to invest in startups that perform well enough to provide you with a substantial return. And you can only minimize or avoid paying taxes for so long.
But the strategies we've outlined today will allow you to benefit from the early losses of a company – as well as its future gains.
Keep in mind that we're not tax advisors, and that every investor's situation is unique. So be sure to speak to your accountant before employing either strategy!
Yes, only two things are certain in this life – but why not defer them both for as long as possible?
Regards
Wayne Mulligan
for The Daily Reckoning | | | | | | | | |  Wayne Mulligan is a Financial Media entrepreneur and executive. Most recently he was CEO of The Institute for Individual Investors (IFII), a financial education & publishing company. At IFII, he helped grow sales to $10 million and spearheaded the company's sale to market-leader Agora Publishing in 2011. | | | | | | | | | BE SURE TO ADD dr@dailyreckoning.com to your address book.
| | | | | | | Additional Articles & Commentary:
Join the conversation! Follow us on social media:
| | | | | | | | | |
© 2013 Agora Financial, LLC. 808 Saint Paul Street, Baltimore MD 21202. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. 
No comments:
Post a Comment
Keep a civil tongue.