The JOBS Act: Crowdfunding Guide to Small Businesses and Startups
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Equity crowdfunding vs. rewards-based crowdfunding
Business Development. To say that entrepreneurs work hard on their business is an understatement. They pour untold hours into their work, whether it's getting their venture off the ground or reaching for that next rung on the ladder of success. It would be fair to say that for most, it is their life's passion. Given that level of commitment, there are likely no more frightening, wake-up-in-a-cold-sweat scenarios about the theft of your idea. Unfortunately for one entrepreneur, she was forced to live that nightmare. Late October saw some exciting activity in the crowdfunding industry, but federal equity crowdfunding is still not possible.
As we head into the final two months of , the industry seems to be growing weary of waiting for the SEC to produce final rules.
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That is not to say that anyone is giving up on crowdfunding—quite the opposite! The information and materials on this website are provided for general business informational purposes only and are not intended to be legal advice. The law changes and varies from jurisdiction to jurisdiction. No attorney-client relationship is formed nor should any such relationship be implied.
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Nothing on this website is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction. If you require legal advice, please consult with a competent attorney licensed to practice in your jurisdiction. Read more. Contact Log in. The Traklight Blog Explore the world of intangible assets and IP with guest blogs, business owner interviews, and more. Wed, Feb 22, Crowdfunding , Fundraising. Read More. Wed, Feb 1, Crowdfunding. Wed, Nov 30, Crowdfunding.
A Walk Through the JOBS Act of 2012: Deregulation in the Wake of Financial Crisis
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Wed, Feb 3, Crowdfunding , Copyrights. Mon, Nov 2, Crowdfunding. Mon, Oct 12, Crowdfunding. Wed, Jul 15, Crowdfunding. Any issuer terminating its annual reporting obligations is required to file notice on Form C-TR reporting that it will no longer provide annual reports pursuant to the requirements of Regulation Crowdfunding. An issuer is allowed to compensate others to promote its crowdfunding offerings through communication channels provided by an intermediary, but only if the issuer takes reasonable steps to ensure that the promoter clearly discloses the compensation with each communication.
Securities purchased in a crowdfunding transaction generally cannot be resold for a period of one year, unless the securities are transferred:. However, securities issued pursuant to Regulation Crowdfunding are conditionally exempted from the record holder count under Section 12 g if the following conditions are met:. In that circumstance, an issuer is granted a two-year transition period before it is required to register its class of securities pursuant to Section 12 g , so long as it timely files all of the annual reports required by Regulation Crowdfunding during such period.
An issuer seeking to exclude a person from the record holder count of Section 12 g is responsible for demonstrating that the securities held by the person were initially issued in an offering made under Section 4 a 6. Understanding the categories of persons that are covered by Rule is important because issuers are required to conduct a factual inquiry to determine whether any covered person has had a disqualifying event, and the existence of such an event will generally disqualify the offering from reliance on Regulation Crowdfunding.
Many disqualifying events include a look-back period for example, a court injunction that was issued within the last five years or a regulatory order that was issued within the last ten years.
The look-back period is measured from the date of the disqualifying event — for example, the issuance of the injunction or regulatory order and not the date of the underlying conduct that led to the disqualifying event — to the date of the filing of an offering statement. Disqualification will not arise as a result of disqualifying events relating to any conviction, order, judgment, decree, suspension, expulsion or bar that occurred before May 16, , the effective date of Regulation Crowdfunding. Regulation Crowdfunding provides an exception from disqualification when the issuer is able to demonstrate that it did not know and, in the exercise of reasonable care, could not have known that a covered person with a disqualifying event participated in the offering.
The steps an issuer should take to exercise reasonable care will vary according to particular facts and circumstances. An instruction to the rule states that an issuer will not be able to establish that it has exercised reasonable care unless it has made, in light of the circumstances, factual inquiry into whether any disqualifications exist.
Disqualification will not arise if, before the filing of the offering statement, the court or regulatory authority that entered the relevant order, judgment or decree advises in writing — whether in the relevant judgment, order or decree or separately to the Commission or its staff — that disqualification under Regulation Crowdfunding should not arise as a consequence of such order, judgment or decree. Regulation Crowdfunding also provides for the ability to seek waivers from disqualification by the Commission upon a showing of good cause that it is not necessary under the circumstances that the exemption be denied.