Hill Introduces S Corporation Crowdfunding Legislation
WASHINGTON – Today, Congressman French Hill (AR-02) introduced H.R. 4831, which would amend the tax code to make an exception to the 100-shareholder S corporation (S corp) limitation in the case of shares acquired through certain crowdfunding or small public offerings.
The 2012 JOBS Act made it easier for small businesses to raise capital by expanding Regulation A and through crowdfunding, allowing companies to more easily raise relatively small amounts of capital from a number of investors. However, restrictions placed on S corps—most notably the 100-shareholder limitation—may hinder their ability to take advantage of these new avenues to raise capital. H.R. 4831 would expand the use of Regulation A and crowdfunding to S corps.
After introducing the bill, Congressman Hill stated:
“The successes of businesses of all sizes controls the health of our entire economy. As someone who has helped small businesses and worked in banking for more than two decades, I know first-hand how those successes can be directly affected by a company’s ability to efficiently raise capital. Reg A+ and crowdfunding provide new avenues for small businesses to raise the money needed to grow their operations. However, entrepreneurs who have elected an S-corp structure cannot utilize these methods without potentially endangering their tax exemption. My bill will offer a simple correction allowing S corps to remain S corps while utilizing these new, cost-effective methods of raising capital.”