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Crowdfunding – What Is It?
What are the basic rules?
How does it work?
Join The Our Shawn for the McBride Attorney Legal Show(TM) as we explore what we are seeing today in the legal landscape what we need for the future.
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Here is a machine transcript of the show. We note this has not been checked for accuracy and is based on what a computer has generated based on the conversation. But we hope it is helpful to you.
Hey everyone The Our Shawn. Welcome to the McBride Attorneys Law Show want to discuss today crowdfunding. What is it, what are the basics. How does it work.Normal disclaimer applies here.
I’m an attorney, I’m licensed in 12 states in DC. However, I’m not your attorney, by virtue of doing this business.Unless you call my office. We work together. I’m not representing you just getting general ideas on the law, what’s going on there. And what’s happening.Want to dump jump into crowdfunding which has been a popular topic lot of media attention here over the years. A lot of your top of that.Unfortunately we’re seeing a decrease in the number of funding portals out there. And the question is why.I think when the SEC who’s really in charge of crowd funding at the federal level here in the United States set up the rules, the rules became so cumbersome that most peopleDon’t want to comply with them, the cost benefit equation just didn’t work out.
So the four rules for crowdfunding are available at the SEC website and I’m actually going to be looking at the SEC compliance guide.While I’m speaking with you. So if you want to. If you want to check that out. Go to regulation crowdfunding. I’m looking at the Small Entity Compliance Guide for issues.Which is available sec.gov and it will really lay this out in detail, but let’s summarize it.Basically you have a maximum offering at the current time of $1,070,000 this is being recorded in 2019 that number is sometimes index to inflation. So it mayAdjust then you have investor limits, depending on the income or net worth of your investor, you can calculateWhat the maximum now per investor is so you can raise up to that million $70,000 but then the amount that you can get from each investor.Changes, you have to conduct your transactions through an intermediary.
That’s the portal or other crowdfunding platform that you go throughYou have eligibility requirements usually has to be a US company. You can’t be set up in certain ways to prohibit it, and all that’s laid out again at the SEC website.Then you have to do certain disclosures and this is where a lot of work comes in, they’re really explaining your business, you end up doing a lot of work that people really didn’t envisionWhen we came out with the crowdfunding rules and then you also may have a requirement to do annual records afterwards. Once you’ve sold it, and you have to provide annual reports.If you make until certain requirements are met, so you’re going to have some work. And then also, you’re going to get limitations on how you can talk about your investment giant have toLink people back to that portal, the stock is restricted from sales and then of course you have certain requirements on who can be involved.
So a lot of regulation around this andThat’s why a lot of people get frustrated a lot of paperwork to fill out and you generally have to get an attorney involved.There are a lot of people jump them. They want to build portals. They want to go consulting companies, they want to help people do crowdfunding.And the truth is, it hasn’t really taken off, why hasn’t taken off because there’s other exemptions.The basics of securities all is either you can register something or you can be exempt.And a lot of people have looked at other exemptions. Very few people want to go through the registration process, the exemption processes is where mostSmaller and private companies want to be as you don’t want you to the full fledge registration do all the requirements required be a full SEC reporting happen.
So, you, you, you look for an exemption and other exemptions, which has competed very well.With crowdfunding and we’ll do a separate video for that. So make sure you check out the McBride attorneys law showOn YouTube or WWW dot McBride attorneys calm and look at our show on exemptions and I talk about what exemptions are in that showI’m also going to walk you through some popular exemptions, as of the time of recording so you can understand what’s going on.So the reality of crowdfunding is it’s difficult, you typically need to get a lawyer involved.
Explain to you all the nuances and most people have been disappointed.With the outcome. So, folks, it’s out there. It is definitely a tool I talked about in terms of having a toolbox.Of options for you if you want to raise money crowdfunding is one of the options regulation cf. But there are many other options here toolbox and we’re going to jump into thoseOne layer of McBride attorneys last WWW dot McBride attorneys comm check out our blog and find a video you find more information about the other options there. So this is just one tool in the toolkit.Figure out whether it’s right for you and then build your strategy accordingly. All right.
Looking forward to see you in a video, make sure you subscribe.To the McBride Attorneys Law Show on YouTube and ring the bell. So you get notifications. We put more videos up there. I’m The Our Shawn, I’ll be talking to you again very soon. Another video
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