There has been a lot of changes in the way funds are being raised for launching a business or startups. One of the best innovation in this field has been crowdfunding. Crowdfunding basically allows an entrepreneur to get funds from peers through online platforms for a project or business plan. There have also been many changes in the way crowdfunding is being done. With the enactment of the JOBS Act in 2012, there are many crowdfunding legal issues which surround the way money is being raised online.
After the SEC approval of the JOBS Act, there have been some major crowdfunding legal issues. It has brought some important changes for people trying to launch their business through crowdfunding. These crowdfunding legal issues mostly affect the equity-based crowdfunding. With the advent of these crowd funding legal issues, even small investors will now be able to invest in big companies.
What are some of the crowdfunding legal issues?
After the rules of the JOBS Act was released, there have been many questions about what will be new the crowd funding legal issues. How will these crowdfunding legal issues affect the entrepreneurs? Will these be helpful in launching new businesses or startups? If the new rules are analyzed carefully, one can find all the answers.
#Facilitating the investment by the non-accredited investors
The first change which the JOBS Act brought in the crowd funding legal issues is: Facilitating the investment by the non-accredited investors. Before this, only the individuals with an income of $200,000 annually, called the accredited investors were allowed to invest in equity crowdfunding. This change brought in the crowdfunding legal issues gives more opportunities to the people to invest in startups.
#Raising the Amount
Other crowdfunding legal issues which were addressed in the JOBS Act were: Raising the amount a company can raise to $5 Million from $1 million. Despite many people hoping for this new change, SEC did not approve this raise. Another change in the crowdfunding legal issues is that the need for a financial audit has been dropped. And now the companies can use reviewed financials to raise money.
#Security of Investments
Crowdfunding legal issues dealing with the security of these investments have also changed. The company is supposed to disclose all the costs before going for crowdfunding. And also the goal which needs to be raised and the time required to reach it.
#Disclosing Financial status and Tax relief
The company is also required to disclose the financial status of the company to the SEC. These new crowdfunding legal issues also offer a relief in the tax. This in turn increase the investments in the businesses and startups.
Equity crowdfunding has seen most of the changes in the legal issues. And it doesn’t affect the legal issues of the other types of crowdfunding. The usability of these new laws and rules can only be determined in the future but for now, these changes have at least created opportunities for new companies and startups to raise funds.
