The Background Behind Crowdfunding

You own a profitable, large company and want to use your money to help out another business just opening your doors. There are several options for you to consider so that you can invest in one of these start-ups including Crowdfunding, which has become increasingly popular. However, before you take the first steps, be aware that there are some limitations to this type of partnership. Here are a few items to keep in mind before to commit to this type of support. 

Limited Amount Of Dollars That You Can Spend

Crowdfunding is regulated by the government so there are certain guidelines that you must obey when you choose to invest this way. Your spending with a small business to help them get started must stay under a million dollars. This can hinder them if their costs exceed this amount. However, by law, that is the most that you can give to them. If you want to help multiple start-ups with cash, there is a limit to how much you can contribute that is calculated by your income per year. When you do purchase shares in a company that needs your assistance, there could be conditions put on the transactions that you make with them for a full year. 

The Legality Behind Your Investments

When you decide you want to participate in a Crowdfunding request, you must negotiate with the start-up through a broker or a funding portal. You are unable to work with them one-on-one. You also must be located with the United States and be a singular investor instead of a financial institution. These types of groups will be omitted from any efforts.  If you qualify and this is still your intention, you will need to schedule a meeting with one of these sources and discuss what your next steps will be and what fees they will charge to work with you. 

Working with the Securities and Exchange Commission

You must let the Securities and Exchange Commision know when you have made a deal then send them a detailed financial report concerning your own corporation and the financing that you have provided. Another report must be filed again once you have finished your investment with the business that you are supporting. You and any other decision makers in your organization might be subjected to a background check and could be required to submit additional information if the SEC requests it. Whichever way you determine to go, talk with your attorney to see if Crowdfunding is a good idea or if they have a better option that will protect your assets while you help a future business owner.