Tag Archives: crowd-funding

The JOBS Act and Your Small Business — A Heads-up on the Basics

So does it affect you? And if so how?

First the highlights of the JOBS Act compliments of security and regs attorney Morrie Simkin. (There’s a link to the whole article at the bottom
of the entry).

The JOBS Act (Jumpstart Our Business Startups Act), signed into law on April 5, 2012, has several parts.

— It will help companies with annual sales under $1,000,000,000 go public and file periodic reports with the SEC for up to five years after they go
public.
— It will help a company making a private placement.
— It creates a crowd funding source for raising capital. Offerings under this part do not have to be registered with the Securities and Exchange
Commission (SEC) or any state, but they are subject to a maximum of $1,000,000 in any 12 months.
–It raises the limits for the small offering registration requirements under Regulation A of the Securities Act of 1933 (Securities Act) to
$50,000,000, and such offering is exempted from state registration requirements.
–The standard for when a company has to register a class of its securities under the Securities Exchange Act of 1934 (Securities Exchange
Act) has been raised.

Now, what’s it mean to a small business:

— When the SEC implements the JOBS Act by adopting the rules the law requires, it will make it easier for companies to go public (IPO) and to conduct private placements.
— However, if you are fund raising, the Act will make it more difficult for you because you will now have to report on a regular basis as well as
fund your own audits (which could run $30 – $40,000 a year).
–For the finders of the world (those who source money for a fee), there is no help in the JOBS Act. If you register as a finder, then you can neither
advertise your services nor can you collect success fees. So basically, you’re in the same place as you were before the Act.

To read the whole article … A User Friendly Primer on the JOBS Act For the Business Person and the
Capital Raiser and get additional analysis from the expert go to this link

http://www.mclaughlinstern.com/docs/news-and-press/The_Jobs_Act_Morris_Simkin_042612.pdf

 

Sandra Holtzman teaches CEO 035: Licensing.
She is the author of Lies Startups Tell Themselves to Avoid Marketing.

Crowd-funding Gets More Controlled

You are an entrepreneur contemplating starting a business and you are wondering where you will get the funds to finance it with. On March 22, 2012 the U.S. Senate passed the JOBS Act, or Jump-Start our Business Start-ups. This, they presume, will make it easier for small businesses to raise money.

You have heard the word, Crowd-funding, previously written about in this column. Business owners can raise money from people they may not even know by posting their information and financial need on websites that facilitate this purpose. This is money that basically you wouldn’t need to pay back, and it would help you start your business, and would be considered a donation. This can be an issue of legality with the Securities and Exchange Commission because investors are not being given a security in exchange for their money. However, some businesses are giving back to the investors some form of payment in the way of product they created.

Sites such as ArtistShare, Kickstarter, Pledgemusic and Funding4Learning have a failsafe. They hold funds in an escrow account. If the nominated target isn’t reached, all funds are returned to contributors. While sites such as Fondomat, RocketHub, IndieGoGo and Sponsume allow projects to keep all the funds raised.

But now the U.S. Senate has tightened the process with its amendment saying that any company raising money using Crowd-funding must still file some basic information with the Securities and Exchange Commission, including the names of directors, officers and holders of more than 20 percent of the company’s shares, plus a description of the business and its financial condition.

For companies seeking to raise less than $100,000 they must also provide tax returns and a financial statement certified by a company principal; those raising up to $500,000 must provide financial statements that are reviewed by an independent public accountant.

Indicating that there is a great chance for fraud with crowd-funding, intermediaries offering to help companies raise money must register with the Securities and Exchange Commission, make sure investors are advised of the risks they are taking, and take measures to present fraud.

This bill will return to the House for a final vote, and then on to President Obama the week of March 26 for his ratification.

Margo Moore teaches BE 261 Starting a Small Business, CEO 001 Setting a Course for Your Business, CEO 002 Knowing Your Market, and CEO 003 Formulating Your Financial Strategy.