SEED FUNDING: Money and Capital

Posted on March 5, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

DEFINITIONS

By Staff Reporters

SPONSOR: http://www.MarcinkoAssociates.com

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Seed money, also known as seed funding or seed capital, is a form of securities offering in which an investor puts capital in a startup company in exchange for an equity stake or convertible note stake in the company.

The term seed suggests that this is a very early investment, meant to support the business until it can generate cash of its own, or until it is ready for further investments. Seed money options include friends and family funding, seed venture capital funds, angel funding, and crowdfunding.

Types of Seed funding

  • Friends and family funding: This type of seed funding involves raising money from friends and family members.
  • Angel investing: As mentioned above, angel investors are wealthy individuals who provide seed funding in exchange for equity ownership.
  • Seed accelerators: These are programs that provide startups with seed funding, mentorship, and resources to help them grow their businesses.
  • Crowdfunding: This type of funding allows startups to raise money from a large number of people, typically through an online platform.
  • Incubators: These are organizations that provide startups with seed funding, office space, and resources to help them grow their businesses.
  • Government grants: Some government agencies provide seed funding for startups working on specific projects or in specific industries.
  • Corporate ventures: Some big companies set up venture arms to provide seed funding to startups in their industry or complementary field.
  • Micro-Venture Capital: A type of venture capital that provides seed funding to new startups and early-stage companies with a small amount of money.

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CROWD-FUNDING: Income Tax Implications

Posted on August 31, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

SPONSOR: http://www.CertifiedMedicalPlanner.org

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Crowdfunding is a popular way to raise money online. People often use crowdfunding to fund raise for a business, for charity, or for gifts. It’s important to know that money raised through crowdfunding may be taxable.

Do you have to pay taxes on the money you receive from GoFundMe, etc?

Generally, you will not owe taxes on donated funds you receive from a crowdfunding platform. The IRS considers the money received from GoFundMe to be a gift instead of income, so it is typically not taxable. A gift is any transfer of cash or property you make to an individual without receiving full consideration in return, according to the IRS. People who donate money to GoFundMe to help pay for medical expenses are typically doing it out of generosity and do not expect anything in return. 

Some money raised through crowdfunding may NOT be considered a gift.

Under federal tax law, gross income includes all income from any source, unless it’s excluded from gross income by law. In most cases, gifts aren’t included in the gross income of the person receiving the gift. Here’s what people involved in crowdfunding should know:

  • If a crowdfunding organizer is raising money on behalf of others, the money may not be included in the organizer’s gross income, as long as the organizer gives the money to the person for whom they organized the crowdfunding campaign.
  • If people donate to a crowdfunding campaign out of generosity and without expecting anything in return, the donations are gifts. Therefore, they will not be included in the gross income of the person for whom the campaign was organized.
  • However, not all contributions to crowdfunding campaigns are gifts and may be taxable.
  • When employers give to crowdfunding campaigns for an employee, those contributions are generally included in the employee’s gross income.

Taxpayers may want to consult a trusted tax pro for information and advice regarding how to treat amounts received from crowdfunding campaigns.

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