In 2012, President Obama signed the JOBS Act into law. Dubbed the Jumpstart Our Business Startups Act, the statute intended to ignite America’s small business sector by democratizing the way companies can market investment opportunities.
JOBS Act Perk For Startups: Allows Startups To Crowdsource Initial Stock Investments
Over the past several years, crowdsourcing has taken off, but many rules still stand in the way of being able to crowdfund everything. The JOBS Act, however, removes some of the obstacles. Most notably, Title III of the Act removes various registration and investment requirements thereby paving the way for startups to sell stocks over the Internet.
JOBS Act Perk For Startups: Increases The Shareholder Reporting Threshold
Not only does the JOBS Act permit the online sale of startup stocks, but it also extends the financial reporting start date, from two years from business conception to five.
Additionally, in past, companies had to register with the SEC when their assets reached $10 M, and they had 500 shareholders. Once this section of the JOBS Act goes into effect, the shareholder number will increase to 500 “unaccredited” shareholders or 2,000 total shareholders.
JOBS Act Perk For Startups: Redefines Emerging Growth Company
The Jumpstart Our Business Startups Act also redefines the “emerging growth companies” category. Under the new rules, companies that gross less than $1 billion in the most recent fiscal year qualify as emerging. So why is it beneficial to be categorized as an EGC? They are exempt from certain filing disclosure requirements. Score.
JOBS Act Perk for Startups: More Marketing Freedom
Another great thing about the JOBS Act is that it lifts certain solicitation regulations. Specifically, it removes the ban on “general solicitation. As such, that means startups can approach different types of investors – perhaps most alluringly, small-time investors – which betters one’s chances of getting funded.
Is There Anything That The JOBS Act Prohibits?
All in all, the JOBS Act received widespread support in the tech sector. And, if all goes according to plan, it should open the door for a lot more startups. However, if you are planning on trying to build an investment fund via crowdfunding, think again. Officials decided that is not allowed.
JOBS Act Lawyer
If you have a company, or an idea for a startup, and want to speak with an attorney about the new business formation possibilities presented by the JOBS Act, get in touch. Kelly Warner has many tech sector and online companies as clients, and we keep on top of the latest Internet laws. We like to think of ourselves as the ideal law firm for startups – why not see if you agree and give us a ring today to start the chat.