Dubbed the “Jumpstart Our Business Startups Act,” the Jobs Act democratized the way companies can market investment opportunities.
Startups Can Crowdsource Initial Stock Investments
Crowdsourcing is a confirmed hit, but rules still apply. The act, however, removed some crowdfunding obstacles. Most notably, Title III of the Act removed various registration and investment requirements, which paved the way for startups to crowdsource certain investment stocks.
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 to five.
Additionally, in the past, companies had to register with the SEC when their assets reached $10 million 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.
Redefines Emerging Growth Company
The Jumpstart Our Business Startups Act also redefines “emerging growth companies.” Under the new rules, companies that gross less than $1 billion in the most recent fiscal year qualify as emerging.
Why are EGCs beneficial? They’re exempt from certain filing disclosure requirements.
More Marketing Freedom
The JOBS Act also lifts certain solicitation regulations. Specifically, it removes the ban on “general solicitation.” How does that help? Startups can approach different types of 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.
Kelly Warner focuses on Internet and technology law. As such, we work with many startups. Learn more about our online business practice here, or contact us with any questions.
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