Invest Indiana Crowdfunding Exemption Now In Effect
As of Wednesday, July 2nd, Indiana joined the likes of Georgia, Kansas, Maine, Michigan, Washington and Wisconsin by implementing intrastate crowdfunding. Signed into law by Governor Mike Pence back on April 2nd, the Invest Indiana Crowdfunding Exemption allows non-accredited investors to invest up to $5,000 per campaign in privately-owned businesses. In turn, Indiana entrepreneurs are allowed to raise up to $2 million from Indiana residents through the internet.
Secretary of State Connie Lawson offered the following statement: “It is intended to be one more tool to help Indiana companies get off the ground and stay productive. This new market will change the way Indiana entrepreneurs and investors connect. It means that Indiana companies have the opportunity to raise capital from a different source than in the past. (Crowdfunding is) a way for businesses to harness the power of the Internet and reach investors they couldn’t reach before.”
Prior to the equity crowdfunding law being passed, Indiana companies could only offer securities, or shares, to accredited investors with an annual income over $200,000 or a net worth of at least $1 million excluding the value of their home. Today, any Indiana resident can invest. Here is a summary of intrastate crowdfunding exemptions across the country.
Indiana Officials Highlight the Risks of Investing
One of the main criticisms of equity crowdfunding is the inexperience of non-accredited investors. Although the depths of disapproval vary from person to person, the SEC is fully aware of these risks and is working hard to finalize federal guidelines for Title III of the JOBS Act. The State of Indiana executed the same meticulous approach to their intrastate crowdfunding rules and vows to continue educating investors on the particulars of equity crowdfunding.
Indiana Securities Commissioner Carl Mihalik: “Hoosiers need to be aware of the risks before they invest and they should always do their research before investing. As always, our efforts to fight fraud and impose consequences will continue regardless of the type of investment.”
In order to stop fraud before it starts, Indiana is forcing potential equity crowdfunding businesses to register with the Secretary of State by filing a Form D with the Indiana Securities Division and pay a $100 fee. For businesses attempting to raise the maximum $2 million, they must submit their offering, financial information, the name(s) of their internet host(s) and the name of their escrow agent. Companies who do not disclose their financial data can only raise $1 million.
As for investors, they can visit any hosted site to browse and research the companies that interest them. Any funds they choose to invest will be kept in an escrow account until the company has raised the total amount it committed to raise in the designated time period. If the company does not reach its funding goal, investors will get their money back. Investors can also cancel their pledge up to 48 hours before the funding deadline.
The Positive Economic Impact of Equity Crowdfunding
Many of the states who have enacted their own equity crowdfunding laws agree on two things: equity crowdfunding for non-accredited investors will help stimulate local economy and create jobs. Dating back to his campaign and election in 2012, Indiana Governor Mike Pence has always been an advocate for small businesses. In his short time in office he has already achieved the largest state tax cut in history and lowered the business personal property tax and corporate income tax. He is a firm believer in the power of entrepreneurship and what it means for the economic health of his state: “(We) still want to bring in jobs of 500 or 1000 at a time but (we are) equally concerned about bringing jobs here 5, 10, 15 at a time because there is a recognition that small businesses and entrepreneurs truly are the economic engine of Indiana. We want to do whatever we can to make Indiana the best place to start and grow your company.”
The idea is, with more small businesses and startups gaining capital through equity crowdfunding, the more employees they can hire. Once these jobs are created and investors see how their money is positively affecting their local economy, they will be inspired (or less hesitant) to continue investing or invest more. Imagine this cycle thousands of times over and it is a strong case for equity crowdfunding in any state.
Still, with all the hope for economic stimulation, Secretary of State Lawson has her priorities in place: “Our job is to protect the consumer. We have a lot of educating to do yet.” Do you live in Indiana and want to learn more? Are you a crowdfunding enthusiast and curious what intrastate crowdfunding is all about? Click the following link for all the official information on the Invest in Indiana Crowdfunding Exemption.
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