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Is It Really a Good Time to Invest in a Small Business?

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Is it really a good time to invest in a small business? Even in good economic times, the answer to that question is always, “It depends.“ Entrepreneurs and angel and venture capital investors who are contemplating investing in C-corporations with gross assets of $50 million or less – and that covers a lot of companies – may have good reason to do so in the next year.

The American Recovery and Reinvestment Act gave small business investors a little more of a break last year by boosting to 75% the percentage portion of the recognized gain that could be excluded on the disposition of qualified small business stock acquired at original issue after February 17, 2009 and before January 1, 2011 and held by non-corporate taxpayers for five years prior to the divestiture for the purposes of calculating capital gains. The prior exclusion was capped at 50%. However, even at 75%, the tax benefit was not as great as it seemed, especially for those taxpayers subject to the AMT.

Now, however, the Obama administration is proposing to eliminate capital gain tax completely on qualified business stock held for at least five years. Just make certain to review how any stock redemptions or other transactions might affect the status of the company’s stock as qualified small business stock. We’re all waiting to see if Congress passes this proposed change in the tax law.

Check with your tax advisor to find out whether you can take advantage of any new tax laws.

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When Your Licensing Board Knocks on Your Door…

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The most important thing you can do after you receive notice from a professional licensing board – for any profession – is to retain an attorney experienced in administrative law. Even if you believe that your actions or inactions were not cause for reprimand or having your license taken away, every step you take after receiving notice is important to the outcome of the investigation. How you respond to the board, how you cooperate with investigators, whether you sign releases or statements – these are all areas on which you should receive competent counsel.

If you retain counsel from the beginning, you will demonstrate to the licensing board that you take the complaint seriously. You might have to gather, review and present evidence, just like you would in a trial, and you will need assistance and advice on what evidence you will need. A regulatory board may more likely reach a mutually negotiated resolution of the matter and at a faster rate with an attorney than without one. Most licensing boards use a subjective standard to review a complaint that is unique to each board and could be difficult to challenge depending on the circumstance; remember the board is made up of your peers who generally do not need to be educated on the issues like a jury and may have their own criteria to determine whether to investigate a complaint further. If the licensing board continues its investigation you could be subjected to an interview and beyond that a hearing in front of the board where representation would be vital to presenting your case.

If you think that hiring a lawyer is too expensive, you should weigh the cost of jeopardizing your license against the cost of retaining experienced counsel. The emotional toll of being challenged in your profession can be great, and you will need an objective voice to help you keep your perspective during the process.

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