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The private equity crowdfunding movement has started to take shape with many states having adopted their own legislation to allow the practice within their borders. In addition to intrastate crowdfunding, the SEC voted last October to approve an interstate bill. It’s important to note that not all of the bills are the same. In fact, while they all have common goals of helping small businesses, many states have different investment limits from an individual and company perspective. Below are examples of three different states that have passed intrastate crowdfunding legislation, along with the SEC’s federal guidelines.
Please note that these are the basic financial requirements – each state has additional requirements that may not be included in this post.
Illinois: Signed into law in May 2015 (goes into effect on January 1st, 2016).
- Company Limits: Any company may raise $1,000,000 per year, or up to $4,000,000 per year if they provide audited financials. The bill also requires the company to prepare quarterly financial results.
- Investor Limits: Unaccredited investors may invest up to $5,000 per company, each year.
Minnesota: Signed into law in June 2015
- Company Limits: Any company may raise $1,000,000 per year, or up to $2,000,000 per year with sufficient financial audits in a 12-month period.
- Investor Limits: Individuals may invest up to $10,000 per company in a 12-month period.
Georgia: Signed into law in December 2011
- Company Limits: All companies, no matter of financial audits, have a limit of raising $1,000,000 per year.
- Investor Limits: Unaccredited investors may invest up to $10,000 per company
Title III of the JOBS Act – Interstate Crowdfunding
- Company limits: Businesses may raise up to $1,000,000 per year
- Investor limits: If an investor’s net worth or annual income is less than $100,000 per year, they may invest up to $2,000, or up to 5% of their income – whichever is greater. Those whose annual income or net worth is more than $100,000 per year may invest up to 10% of their annual income or net worth – whichever is lesser, along with a $100,000 cap.
Georgia was one of the first states to adopt intrastate crowdfunding legislation, and many other states followed suit. In addition to following Georgia’s law, many states have raised the company limits and added, “audited financials” as a provision. Specifically, this means that states will audit a company’s financials to make sure they meet certain financial thresholds. If they do, they are typically able to raise additional funds.
Title III of the JOBS Act gets a bit more granular when it comes to specific investors. In addition to dollar limits, the SEC also takes into account net worth and income when it comes to investment caps. While all of the bills have common portions, each state has different provisions. Prior to investing, be sure to check with your local government for investment requirements.
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