A majority of jurisdictions have adopted crowdfunding provisions in their rules or statutes recognizing that equity crowdfunding, done responsibly, with appropriate disclosure and safeguards, may be another valuable tool that small companies can use to raise capital.
Note: This information is being provided for your convenience and is not intended as legal advice. The information is illustrative only and not an exhaustive list. Any questions should be directed to the appropriate state regulator. The list is current as of January 2, NASAA has issued an advisory for small businesses and entrepreneurs interested in intrastate crowdfunding. The advisory outlines several areas of consideration of crowdfunding issuers.
Courts and lawmakers have gotten this wrong in the context of traditional banks—and a June 30 ruling Join EFF Lists. Electronic Frontier Foundation. By rainey Reitman and Jillian C. Related Issues Financial Censorship.
Email updates on news, actions, events in your area, and more. Email Address. Postal Code optional. Anti-spam question: Enter the three-letter abbreviation for Electronic Frontier Foundation :. Don't fill out this field required. Thanks, you're awesome! Please check your email for a confirmation link. You use a crowdfunding platform to post a listing similar to a traditional crowdfunding campaign, but your investors become shareholders.
This includes voting and dividend rights as outlined in the shareholder agreement. Crowdfunding sites geared more toward investors include MicroVentures and Angel List. While traditional crowdfunding where equity is not exchanged is not subject to federal security laws, there are a number of general legal issues you need to keep in mind:. Form a Business. There are different pros and cons for each type of business structure , but it is important for businesses seeking to crowdfund to set up a business and get a business bank account early instead of operating as a sole proprietor by default.
Certain business structures also will help protect the founders from personal liability. LLCs are a common structure for businesses seeking crowdfunding. If you are looking to build a potentially large company seeking venture capital, you can read more here on why incorporating in Delaware is the most popular choice. Moreover, the customer validation arising from a successful pre-sale campaign grants project owners a valuable tool when negotiating with investors.
Several studies have shown that a successful reward-based crowdfunding campaign influences the proclivity of professional investors to sustain the project with an equity investment.
A well-known example is Pebble, a smart watch that interacts with every kind of smartphone. The Pebble case demonstrates the strength of the interaction between crowd validation and venture capital analysis and strategy. In most jurisdictions, when the perk offered has a value comparable or close to the value of the financial contribution, reward-based crowdfunding is nothing but a sale or, better, a kind of e-commerce.
As a consequence, consumer protection rules are applicable to each subscription, as well as regulations concerning guarantees, delivery, and breach of contract. From a tax point of view, some governments have made it clear that this is not a donation and therefore VAT and similar local taxes are applicable to these kinds of sale, and the European Commission is considering the possibility of uniform regulation.
Offer does not apply to e-Collections and exclusions of select titles may apply. Offer expires December 31,
0コメント