Starting A New Michigan Business? What Do You Need To Know About Crowdfunding Law?

Business Blog

If you're a resident of Michigan and are preparing to take the plunge into entrepreneurship, you may benefit from a recent change in state laws governing equity crowdfunding opportunities -- the ability of small businesses to raise equity through private means or donations. Michigan recently joined several other states in approving a law that would exempt crowdfunding from the administrative, regulatory, and fiduciary requirements imposed on other state institutions that offer the sale of securities. Read on to learn more about how this law changed the crowdfunding opportunities in Michigan, as well as what you'll need to do to begin crowdfunding for your own business.

What has changed under Michigan law?

Michigan -- like many states -- has some strict securities laws designed to help protect citizens from being duped or misled by public or private companies attempting to sell stocks, bonds, or other security or ownership interests in their business. These laws were effective at ensuring that citizens who chose to invest in a local or regional business had access to all the information they'd need to make an informed decision on whether to buy, hold, or sell.

However, for small businesses just trying to get off the ground, these complex regulatory requirements all but eliminated their ability to offer ownership stakes to potential investors. The legal and logistical costs involved in setting up a securities exchange system were much too onerous to be borne by businesses operating on a shoestring budget. By exempting crowdfunding from these requirements and imposing lower barriers to entry on crowdfunding opportunities, the Michigan law makes it significantly easier for new business owners to collect funds from interested investors and offer these investors shares in future business revenue.

What should you do if you want to offer crowdfunding opportunities to your potential investors?

In order to begin crowdfunding, you'll need to take a few preliminary steps. First, you should review the federal government's exemptions contained within sections 141.01 through 141.05 of the federal Securities Act Rules to ensure your business falls within the exemption on a federal level. Because Michigan's law does not trump federal law, failing to qualify under these sections means you won't be able to crowdfund your Michigan business.

You'll then need to check whether you fall under Michigan's exemption. If so, you'll be restricted from collecting more than $1 million through crowdfunding or receiving more than $10,000 from an individual who isn't a qualified investor under Michigan's laws. You'll also need to file a notice, escrow agreement, and investor disclosure statement with the state Department of Licensing and Regulatory Affairs and pay a $100 fee. Finally, before selling any securities, you'll need to ensure your investors sign a disclosure statement that acknowledges the risks of their investment. 


25 March 2016

Creating Better Employee Policies

A few years back, I was faced with a serious dilemma. Our employees had started to strike for what they said were dangerous working conditions when everything was in line with the recommendations from our parent company. We knew that we had to make things right, so we started working as a team to make things better. It was incredible to see how big of a difference we were able to make. Within a few short months, we completely overhauled our business and our employees felt like we cared about them. This website is here to help you to create better employee policies.