Inside the JOBS Act of 2012: Crowdfunding for Start-ups

Earlier this year, legislation was approved to make it
easier for small companies to raise money. The JOBS Act, which officially stands for Jumpstart Our Business Startups, and was voted into approval by the Senate in March 2012 and signed into effect by the President on April 5, 2012. Regardless of whether you think agree or disagree with the terms, it is important for all small business owners to have the facts about the new legislation and terms in the JOBS Act.

Information compiled in this post was gathered from articles appearing in The New York Times, Forbes.com and Inc.com. Original documentation and information about the terms of the legislation can be found online, as posted by the United States Government.

What it is & what it does

The term ‘crowdfunding’ has become a regular part of a small business owner’s vocabulary over the past few months, especially with the passing of the JOBS Act in April. Crowdfunding is a term used to describe when multiple investors support a cause/business/artist/etc. by pledging their monetary support. For many small businesses and solo entrepreneurs, online crowdfunding platforms such as Kickstarter or Indiegogo have become a popular way to raise funds by using social networks to promote a startup venture.

Specifically related to the idea of crowdfunding, the JOBS Act would allow businesses to raise funds up to $1M annually without being required to register the shares for public trading with the Securities and Exchange Commission (SEC). Essentially, the JOBS Act makes it easier for small businesses to solicit investments and institutionalizes a form of financing that is similar to venture capital, but on a smaller scale.

Many skeptics have argued that the JOBS Act could potentially be open to scam artists, as individuals and companies could set up online profiles for fraudulent ventures. However, the bill does require businesses to give information to the SEC, such as the names of directors, officers and holders of more than 20 perfect of the company’s shares. If a company is seeking $100,000 or less, it must provide tax returns and a certified financial statement.

Some experts believe that not only will the JOBS Act allow entrepreneurs to have more access to different funding strategies, but it could also create jobs in the long run (if an entrepreneurial project succeeds and gets funded, there is an expectation that jobs will be created as a direct result; even in solo entrepreneur projects).

There are many sides to the new legislation, but the key takeaway is that ultimately, the legislation is making it easier for small businesses to raise funds, particularly by online crowdfunding platforms.

For more information

To learn more about the JOBS Act, check out the facts (and opinions) as posted originally in the following publications:

United States Government Printing Office: http://www.gpo.gov/fdsys/pkg/BILLS-112hr3606enr/pdf/BILLS-112hr3606enr.pdf

The New York Times: http://www.nytimes.com/2012/03/23/business/senate-passes-start-ups-bill-with-amendments.html

Forbes.com: http://www.forbes.com/sites/work-in-progress/2012/04/05/jobs-act-to-jumpstart-the-job-market/

Inc.com: http://www.inc.com/sherwood-neiss/why-you-can-feel-good-about-the-jobs-act.html

What are your views on the JOBS Act? Will it help small businesses and solo entrepreneurs? Have you considered crowdfunding? If so, what platform fit your needs best and why?

Thanks for reading, and until next time… stay WISE!

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This entry was posted in bootstrapping, business, business finances, entrepreneurship, opportunities, start-up ventures, women in business and tagged , , , , , , , , , , , , . Bookmark the permalink.

2 Responses to Inside the JOBS Act of 2012: Crowdfunding for Start-ups

  1. Crowdfunding as created by the JOBS Act is sweeping social reform. It is the first time in nearly 80 years since the promulgation of the Securities Act of 1933 that a new exception to the general rule on selling and registration of securities has been created. We are now in a holding period during which the SEC is tasked with the responsibility to draft the rules and regulations that will govern crowdfunding. The SEC has until January 2013 to promulgate these laws but there is currently speculation as to whether it will meet the deadline. Until then, even though the JOBS Act is now law, crowdfunding remains illegal. However, when it is finally permitted it will likely herald a new era where social media will meet the financial markets and open new lines of capital for small businesses.

    For more information on crowdfunding and other legal topics please visit http://www.LegalEsq.com.

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