The JOBS Act and What it Means for Your Startup

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The Securities and Exchange Commission has been issuing new regulations to define the details of what the JOBS Act really means. Some new rules took effect on May 16, 2016. There are several important titles to the JOBS Act.

What is the JOBS Act?

In 2012 Congress passed the Jumpstart Our Business Startups Act or “JOBS Act” for short. The purpose of this act was to make it easier for startups and small businesses to raise investment capital. The theory is that helping startups launch and grow can create more new jobs. To do this the JOBS Act modifies existing Federal securities laws.

Here is a quick
overview of the most important sections of the JOBS Act:

•Title I reduces reporting requirements for so-called “Emerging Growth Companies”
•Title II of the JOBS Act allows for advertising and general solicitation of stock offerings (within certain specific limitations).
•Title III created the crowdfunding exemption for startups raising investment capital over the internet.
•Title IV gives the SEC the authority to create a special exemption for certain small private offerings of less than $50 million.
•Titles V and VI raise the number of stockholders a company may take on before registration is required.

Upon enactment of the JOBS Act, Titles I, V, and VI took effect immediately. Other provisions have been rolled out as the SEC issues new regulations.

What Does the JOBS Act Mean for the Future of Startup Funding?

The JOBS Act makes raising money for start-ups, easier, quicker and less expensive. It’s still unclear how big an impact the JOBS Act will have on startup funding as a whole. The online equity crowdfunding and general solicitation exemptions may help a new generation of entrepreneurs raise seed money for their startups. There may be yet another big wave of capital coming for certain kinds of innovative startup companies.

James H. (Jim) Gulseth was born and attended high school in Devils Lake, North Dakota and graduated with an A.B. degree from the University of California at Berkeley. He earned his JD degree at the University of California Hastings School of Law in San Francisco. He is a member of the Corporations, Business Transactions, Securities and Tax and Intellectual Property Sections of the State Bar of California and is a member of the State Bar of California, the Alameda County Bar Association, and a member and past President of the Eastern Alameda County Bar Association.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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