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Raising Capital For Rhode Island Businesses Under The New Crowdfunding Rules

By Attorney Michael Richards

Raising capital can be a company’s biggest challenge. Historically, federal securities laws only allowed companies to sell shares of stock in a company if the offering was registered with the Securities and Exchange Commission or if the sale of stock fell within a specified exemption from registration.

As registration with the SEC is rarely practical for early-stage companies, companies have relied on exemptions from registration – namely, restricting the offering to ‘accredited investors’, individuals with a net worth exceeding $1,000,000.00 or annual income exceeding $200,000.00.

But beginning on Monday, May 16, 2016, new “Regulation Crowdfunding” goes into effect that allows businesses for the first time to raise capital by selling shares to non-accredited investors.

For growing companies in need of capital, this is a revolutionary new way to raise critical funds needed to launch a new business or expand an existing business into new markets.

For non-accredited investors, this is the first time they can invest on the ground floor – not the Initial Public Offering after the rapid growth phase of a business is long past.

If you have any questions about raising capital for your Rhode Island business, we encourage you to call us. To learn more about the new “Regulation Crowdfunding” going into effect, have a look at the Wall Street Journal article, New Rules Give Startups Access to Main Street Investors.

Buying or selling real estate at an auction can be complicated

A small but growing percentage of real estate is being sold at auction. The advantage of an auction for a seller is that the property will definitely be sold quickly, although usually at a lower price. So auctions often attract sellers who simply want to unload a property, such as a lender that has foreclosed on it, or an executor whose heirs want cash and not real estate.

Auctions often attract buyers who are looking for a deal – although auctioned properties are usually sold “as is” with no guarantees, so unless you’ve done careful homework and had everything inspected thoroughly, the property might not be as good a deal as you first thought.

Auctions require special contracts and agreements that aren’t part of a traditional real estate transaction.

Because auctions are unusual and require special contracts and agreements, a seller will definitely want to work with an attorney as well as an auctioneer.

The first contract is between the seller and the auctioneer. This should include the auctioneer’s compensation and any specific requirements such as a minimum price, deed restrictions, or a seller’s veto power over the auctioneer’s advertising materials. [Read more…]