The 6 New Crowdfunding Laws for Entrepreneurs

Nov 04, 2013


sec crowdfunding laws

Crowdfunding for the broken walleted?  Not so fast.  It still takes money to crowdfund money!

Here are the new SEC crowdfunding laws entrepreneurs, investors, and crowdfunding portals can look forward to.

The time has almost finally arrived.  While new SEC crowdfunding laws officially made it legit for entrepreneurs to advertise they were raising money, the laws opening the flood gates for nonaccredited investors remained closed. Last week, the SEC finally approved the new regulations for investors. It will still be another 90 days before they can close due to comments.  But as long as everyone is happy & keeps their mouths shut, it should go into effect shortly thereafter.

For Entrepreneurs, these are the new SEC Crowdfunding Laws:

  1. Total amount that may be raised in a Crowdfunding offering is $1,000,000.
  2. Entrepreneurs raising over $100K, must have financials (visit EZ Numbers).
  3. Entrepreneurs raising over $500K, must have audited financials (visit the CPA nearest you).
  4. Annual reports needs to be filed with the SEC by any company that conducted a Crowdfunding offering.
  5. The company raising funds under the Crowdfunding rules must prepare disclosure and legal documents which comply with the rules.
  6. Crowdfunding deals must be processed through a Crowdfunding portal that acts like the title or escrow company in the transaction. Crowdfunding portals must be on-line companies registered with the SEC.

For Crowdfunding Platforms & Investors, these are the new SEC Crowdfunding Laws:

  1. Crowdfunding offerings up to $500,000 do not need to have audited financial records. Offerings over $500,000 must complete audited financials.
  2. Crowdfunding portals must be registered with the SEC and must also register with FINRA.
  3. The income or net worth of an investor, which determines how much they can invest, does not have to be verified by the portal.
  4. Non-accredited investors may invest an amount between $2,000 and $10,000 depending on their annual income or net worth. This is a total for all Crowdfunding projects from that person annually.