HATTIE: Number seven. Sell it over time to the general public through one of the direct public offering instruments.
HATTIE: (Voiceover) The people of Blue Whale movers really move on the job, and that's one of the reasons this Austin, Texas, company has been so successful. When the owners wanted to grow the business, they needed additional money, and they raised it through a Small Corporate Offering Registration.
DAVID PORTER: It cost them a lot of money.
HATTIE: (Voiceover) Stockbroker David Porter has helped them.
DAVID: The company needs a very well-defined, thought-out business plan that will enable people to look at the company and be willing to put money aside for four years, five years, two years, whatever it turns out to be, while they're waiting for that company to effectively employ their money. That's generally the way it works. Generally, people are patient and their reward comes at the end of some period of time.
HATTIE: All right. But with a SCOR offering, the individual who bought into my business is going to hold onto those shares until they find someone to buy it from them.
DAVID: Well, there are several reasons that they want to do that, not the least of which is a tax reason. If you purchase most of these small corporate offerings, the majority will qualify under Section 1202 of the tax code, which means that if you hold them for five years or more, whenever you sell them, you get to exclude 50 percent of the capital gain from taxation.
HATTIE: So that's a good reason to buy a SCOR.
DAVID: That's one good reason to buy a SCOR. Another reason is, that the company may qualify under Sections 1244 or 1245, which say that if you sell that stock and make an equal investment in another qualified company, you at least defer that tax. You don't pay the tax on it right now. Additionally, you have the ability, if things really go badly for the company, that you may be able to write the entire investment off as a direct write-off against your taxes, rather than have to take it as a capital loss.
HATTIE: All right. So tell us why small business deserves our investment?
DAVID: Small business deserves your investment because it has the potential of making you more money with tax advantages that are not available in large companies.