Crowdfunding is the process through which an individual can raise funds for their project or business venture. It has been gaining popularity in the past few years and it is mostly done through online platforms like Kickstarter, Indiegogo, etc. There are mainly four types in which crowdfunding is done. The first is crowdfunding equity, crowdfunding debt, donation-based and reward-based.
Crowdfunding equity has become the most popular type of crowdfunding these days. The term crowd funding equity means trying to raise funds for a project or business venture in return for the shares in the particular company or business. Crowdfunding equity is also sometimes known as crowd investing or crowd equity.
Is Crowdfunding Equity beneficial?
As crowdfunding equity deals with shares and stakes in a commercial company, it involves the certain regulations like financial or security. Crowdfunding equity is a two way process and involves contributors giving funds to receive a small stake or share in the company or business they are funding in.There is always a risk for the contributors that if the business or company doesn’t go well, their
There is always a risk for the contributors that if the business or company doesn’t go well, their investment as well as current shares in that company will be unfruitful. The converse of this is also true and if the business does well it can be very beneficial for the shares of the contributors.Nowadays
Nowadays crowdfunding equity is said to be best suited for new startups and crowd funding equity can prove to be really beneficial in laying out the foundation of the startup.
In the past people having a specified annual income were allowed to invest in crowdfunding equity, but with the enactment of JOBS Act the doors of crowd funding equity has opened for many investors.
Crowdfunding equity is further classified into two types and they are equity-based and debt-based. Though equity based crowdfunding as debt-based crowdfunding was often confused in the past and sometimes were even thought to be same.The main reason behind the confusion between them is the fact that the regulations for both of them are pretty much the same. While equity-based classification of
The main reason behind the confusion between them is the fact that the regulations for both of them are pretty much the same. While equity-based classification of crowdfunding equity deals with the raising of funds for a business in return for the shares in the company whereas debt-based crowdfunding deals with the raising of funds in exchange for the interest payment along with the payment of the money given by the contributor.
It is very important to go through the different laws and regulation about the crowd funding equity before going for it. There are many laws related to the security and financial issues as it involves investment in a financial company. So, it is very necessary to keep oneself aware of these law as and regulation before proceeding with crowdfunding equity.
One benefit that crowdfunding equity has over the other types is that in some places it offers relief from tax payment. In some places crowd funding equity falls under the Seed Enterprise Investment Scheme or the Enterprise Investment Scheme, which helps in relief from the tax.It
It is however, necessary to go through all the criteria of these schemes.There are many crowd funding equity sites available nowadays like CircleUp, OfferBoard, etc. which exclusively deals with crowdfunding equity.
