President Obama signed into law the Jumpstart Our Business Startups Act, also known as the JOBS Act last month. This act makes it easier for small businesses to raise capital and go public. The section on crowdfunding allows companies to use online resources to solicit investments from individuals without having to register their shares with the SEC.
The amount raised must be less than $1 million a year. The intermediaries or brokers of these deals and the start-ups seeking capital will have to provide new documentation. Under the law, the person selling the shares must register as a broker with the SEC and provide a background check on everyone who owns more than 20% of the company.
Brokers must also provide assurance that investors understand the risks associated with investing in fledgling businesses. The new rules make crowdfunding a viable option when it comes to raising capital online.
If you or anyone you know would like to try to raise capital for your invention idea through crowdfunding, please contact us at New Product Consulting.
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