The new JOBS Act—the Jumpstart Our Business Startups Act of 2012—is designed to promote growth among small businesses. Under the law, entrepreneurs will be able to raise cash without jumping through the usual hoops for the Securities & Exchange Commission (SEC). Here are the key provisions.
- A privately owned company with revenue of less than $1 billion can sell up to $50 million in shares through an initial public offering (IPO) without registering with the SEC. Also, companies in this category are exempt from having to commission independent audits of their internal controls for up to five years.
- Small companies may have as many as 2,000 shareholders (up from 500) or 500 unaccredited investors without registering with the SEC. An accredited investor is defined as someone who has a net worth of more than $1 million (not counting a primary residence), earnings of at least $300,000 ($200,000 for single filers) for the past two years, or is a general partner, director, or executive officer of the company issuing the IPO.
- The new law allows “crowdfunding” to attract cash from large pools of small investors. Investments are limited to the lesser of $10,000 or 10% of the income of an investor.
Consult with a professional if you’re interested in issuing an IPO or acquiring shares of one.