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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.