WHAT IS "EQUITY CROWDFUNDING"?

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Charles Jerome Ware, Attorneys & Counselors, LLC, is a premier Maryland-based boutique nationally-respected and highly-regarded law firm with a strong equity crowdfunding component.  For an initial courtesy consultation, call us at (410) 730-5016 or (410) 720-6129, or email us at charlesjeromeware@msn.com.

In sum, equity crowdfunding enables individuals to invest collectively in a private business for a financial return.

There is a lot of confusion about what crowdfunding is and whether it is legal. We wanted to help by sharing some thoughts.

What is Crowdfunding?:

Crowdfunding is the pooling of money together by many individuals to support a person, cause, or business. Over the past few years, the most common kind of crowdfunding has been donation-based. On crowdfunding sites like Kickstarter, thousands of individuals provide a financial donation to projects or ideas, typically in exchange for a product or service gift from the recipient.

Equity Crowdfunding Definition:

Equity crowdfunding adopts this concept and allows individual investors seeking to invest for an eventual financial return in the business. This form of crowdfunding has received a lot of attention recently because of the JOBS Act, legislation passed by Congress and signed into law in April of 2012 but pending implementation.
Today, equity crowdfunding is possible only for accredited investors. That means all participants must meet the standards set by the US Securities and Exchange Commission (“the SEC”) to be an accredited investor – the most common way a person qualifies is by meeting income or net worth standards.
Pending the adoption of implementing Rules by the US Securities and Exchange Commission, the JOBS Act will allow non-accredited investors to invest through a new exemption to the securities regulations called “Crowdfunding.” Until that time, ‘equity crowdfunding’ for non-accredited investors is not yet permitted, and you should be very suspicious of any website or other business that says differently. All offerings should be made through Regulation D, Rule 506.

Why is Crowdfunding Exciting?:

We believe crowdfunding is a classic disruptive innovation. In the offline world, it is difficult for investors to identify and invest in private businesses. It takes time to network into a deal, and even then the investment minimums are typically very high.