Long story short. Our small team have an idea. We need more than $4M in investments and I think crowd funding best suits for us here. We want Investors to hold corresponding share of the company and to earn corresponding percentage of the net profit.
Is there a limit on how much we can raise through internet crowdfunding?
Do we have to deal with SEC?
Essence of the issue, is there a easy way to raise more than $4M, give to investors a company share and send them money for their investments without mountain of paperwork?
If you're looking to solicit the public for money, then you may need some form of a registered offering, which of course means you're dealing with the SEC. It doesn't need to be an offering for a stock on an exchange (although if your idea is good enough there might be an underwriter out there) to be public. Even if you take advantage of the "A+ offering" scheme, you still have to file and report to the SEC, so don't think crowd-funding is a way to avoid legal costs for a capital raise. What your best option may be could be a private placement of stock from accredited investors, which would generally not require registration. Even if you crowd-fund, having an offering circular of some kind is money well-spent.
You might look into Rule 506(c), which is a product of the JOBS Act. Under that rule, if you jump through the right hoops, you can advertise your securities offering if you limit your investors to accredited investors. It's similar to crowdfunding, since you can advertise, but it's not the same as Kickstarter (where you don't offer equity--a share of the profits would be equity) or what most people think of as Crowdfunding where you can raise money from anyone. I've included a link with more info on 506(c). I hope it's helpful.
Andrew S. MayFinancial Markets and Services AttorneyChicago, IL ·
True crowd-funding, i.e., taking small amounts of money from average investors online, was passed by Congress but the SEC regulations have not been finalized. You are in luck in that it is now possible to do general advertising and solicitation under a new SEC regulation as long as you only accept accredited investors, i.e., those with large incomes and assets, not including home equity in a primary residence, in excess of one million dollars. The bottom line is that you will need to hire a securities attorney to draft a private placement memo and file paperwork with the SEC and the various states where you seek to raise funds from investors.
