What is Crowdfunding and what has changed?

What is Crowdfunding and what has changed?

What is Crowdfunding and what has changed? By: Eric H. Milliken, Sutter Law, San Francisco Business Attorney You may know…sites like Kickstarter, Rockhub and Indiegogo. These and other websites take small donations for charitable, artistic endeavors or contributions to launch a business in return for the product being made, service, or some type of a thank-you gift. What has changed? The JOBS Act creates a special exemption for crowdfunding so that companies can sell securities by way of crowdfunding. Generally, under the Act, companies are limited to raising $1 million in any 12-month period using crowdfunding and $2 million with audited financials. Companies cannot crowdfund on their own, but will have to engage an intermediary that’s registered with the SEC as a broker or funding portal. These intermediaries will be required to vet the company seeking funding. Individual investors will be limited in the amount they can invest by way of crowdfunding in any 12-month period to: if your annual income or net worth is less than $100,000 – the greater of $2,000 or 5 percent of annual income or net worth, or if your annual income or net worth is more than $100,000 – 10 percent of annual income or net worth up to a maximum of $100,000. When calculating net worth, you should not count the value of your primary residence or any loans secured by the residence (up to the value of the residence). What are the limitations on “Intermediaries”? Intermediaries may not compensate promoters or finders and may not allow their officers or directors to take a financial interest in any issuer using their services....