Equity Investment in Small Business

credit: Aloetree

X is a small business enterprise located in a deteriorated urban area and owned by members of an economically disadvantaged minority group. Conventional sources of funds are unwilling to provide funds to X at reasonable interest rates unless it increases the amount of its equity capital.

Consequently, Y, a private foundation, purchases shares of X's common stock. Y's primary purpose in purchasing the stock is to encourage the economic development of such minority group, and no significant purpose involves the production of income or the appreciation of property.

The investment significantly furthers the accomplishment of Y's exempt activities and would not have been made but for such relationship between the investment and Y's exempt activities.

Accordingly, the purchase of the common stock is a program-related investment, even though Y may realize a profit if X is successful and the common stock appreciates in value.

This is an illustration modified from examples provided by the Internal Revenue Service. It is not a legal opinion on the tax treatment of any specific agreement between a private foundation and other entity.

PRI News from...

Kresge Foundation

Social Entrepreneurship

Why Social Enterprise is the Way Moving Forward

Thousands of social enterprises in the UK are emerging and they are employing more than one million people. According to the trade body Social Enterprise UK (SEUK)’s estimates, these social businesses contribute £24 billion to the economy.

Social Services Jobs

  Education Jobs
  Substance Abuse Jobs
  Human Services Jobs
  Social Work Jobs
  Fundraising & Development Jobs

Federal Government Grant and Assistance Programs

Small Business Innovation Research | Developmental Disabilities Basic Support and Advocacy Grants | Food Insecurity Nutrition Incentive Grants Program | Common Bean Productivity Research for Global Food Security Competitive Program | Conservation Project Support | Environmental Finance Center Grants | Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) | Public Telecommunications Facilities Planning and Construction | | Site Style by YAML | Grants.gov | Grants | Grants News | Sitemap | Privacy Policy

Edited by: Michael Saunders

© 2008-2021 Copyright Michael Saunders