Kickstarting Startups
One way many new businesses are getting capital to get off the ground is by using a method known as "crowdfunding". The business will set up a page on a website such as kickstarter.com or indiegogo.com, and people can make pledges to fund the business. Normally there are different funding levels, and often there are gifts that the funders will receive for their funding. If the startup does not reach its funding goal, the pledges are returned.
Of course, I wouldn't be doing my civic duty if I didn't mention the tax issues with these sites. The funding donations are generally considered income to the startup. The pledges are not considered tax deductible donations from the funders, because usually the startups are not charities, and often the funders receive something for their funds.
All varieties of startups make use of these sites. I recently bought a pen from karaskustoms.com, which got started using kickstarter. A friend used one to raise donations for the victims of the Oklahoma tornadoes in 2013. And today, a friend just began a kickstarter campaign to raise funds for a restaurant. Sean Carroll has been operating Melange Creperie as a food cart for the last five years, and has decided to move indoors out of the weather. He's trying to raise $50,000 by March 5, 2015. So far he's raised more than $6,600 in 2.5 hours since going live. My wife and I won't touch crepes from anywhere else, so help him out by clicking HERE and pledging.