Q&A: Crowdfunding your small business or startup: What you need to know
You’re inviting a CPA into your offices to do a very thorough exam of your finances. It could cost anywhere from $10,000 to $50,000, or more. Depending on how much money you’re raising, you’d have to submit information about the directors and officers, shareholders who hold more than a $20,000 stake in the business. You’d need to file a description of the company’s business, business plan, financial (documents), copies of tax returns.
And it becomes public record. That can be sensitive information a company might not want to part with.
Q: How do you advertise that you’re looking for investors?
A: (What’s changed is) now you can put an ad in the paper and you can do something on television or radio. But they loaded it up with a lot of conditions. If (you’re) doing general solicitation, you can’t have any unaccredited investors. You’re required to take reasonable steps to verify (your investors) are, in fact, accredited.
There’s lots of paperwork involved — bank statements, appraisals, statements from brokers who manage their money.
Q: So what are your thoughts on the new law overall?
A: Really, all of these changes are a result of balancing interest of a) supporting the economy and promoting job growth and b) protecting the interest of investors and public. There’s a constant tension there.
On the one hand, it seems like Congress was very generous in opening the door to crowdfunding. But they didn’t do it without taking a pound of flesh in the process.
©2013 The Charlotte Observer (Charlotte, N.C.)
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PHOTOS (from MCT Photo Service, 202-383-6099): SMALLBIZ-CROWDFUNDING
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