Lawmakers Unanimously Approve Crowdfunding Investment Bill

crowdfunding, new law, Naperville Business LawyerOwners of smaller businesses who are looking for working capital will have more options beginning in 2016, thanks to a bipartisan measure that flew through the Illinois legislature earlier this year. In a rare display of total cross-party agreement, the House and Senate both unanimously approved a bill approving the practice known as equity crowdfunding to help companies find the financial resources they need from in-state investors willing to provide them. In July, Governor Bruce Rauner completed the cooperative effort, as he signed the measure into law. As a Naperville business law attorney who works with small business owners every day, I am excited about the opportunities the new law offers to the state and to our community, in particular.

What is Crowdfunding?

Unlike traditional investing, which relies on fairly significant contributions from a relatively small number of investors, crowdfunding is essentially fundraising based on the maxim “many hands make light work.” Although the idea has been used for centuries, the rise of internet connectivity has facilitated the process, allowing for larger reach, and subsequently, more possible investors. Spearheaded by websites like Kickstarter and Indiegogo, would-be entrepreneurs look to raise the capital they need a few dollars at a time from dozens, if not hundreds of separate contributors.

For many years, however, business owners were not able to offer equity in return for received capital. Instead, they could provide a tangible good, such a t-shirt or trinket, or the delivery of a future product or service, rather than a stake in the company. While the Jumpstart Our Business Startups (JOBS) Act, passed in 2012 by the federal government, opened to the door to changing that, evolution has been slow and lawmakers in Illinois decided to be proactive.

The New Crowdfunding Law

Developed by Chicago attorney Anthony Zeoli, and introduced by Rep. Carol Sente, D-Vernon Hills, the recently-signed measure addresses only in-state investment relationships. It will allow nonaccredited, private investors with a net worth under $1 million and annual income of under $200,000 to invest up to $5,000 per company each year. A business, for its part, will be permitted to raise up to $4 million in a single investment campaign, a more business-friendly provision than the $2 million allowed in many other states with similar laws. The campaigns will be conducted primarily on web-based portals similar to Kickstarter.

Develop a Plan for Investment Capital

The new crowdfunding measure will undoubtedly create avenues for resources previously unavailable to many business owners. As with any such opportunity, it is important to plan carefully before you begin asking for investors to help fund your vision. For help with all of your business planning needs, contact an experienced Naperville business law attorney. We will help you make the most of your available resources while limiting your potential exposure and liability. Call the Gierach Law Firm at 630-756-1160 for a consultation today.

 

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Sources:

Chicago Tribune

Forbes

Chicago Tribune

Small Business Council