The concept of crowdfunding business ventures has become commonplace in our society through the growth of sites like kickstarter.com, indiegogo.com, or fundanything.com. While these sites serve a valuable purpose, to help people or companies raise money for certain projects, the individuals giving money are essentially donating to the idea (not counting the perks that go along with certain donations). But Michigan has acted quickly and passed a law to bring a new reality to raising money: Equity Crowdfunding in Michigan.
The 2012 Jobs Act
The United States Federal Government passed a bill in 2012, the JOBS Act, that would permit “equity crowdfunding.” Instead of making a donation, individuals can become stockholders in a new or expanding corporation. In other words, you actually buy equity in the business. But, the SEC is still implementing the rules to make the JOBS Act’s crowdfunding provisions run.
Michigan’s Crowdfunding Law
Michigan is not waiting for the federal government to finalize its rules. On December 30, 2013, Public Act 264 (PDF) became law, permitting businesses to offer and sell securities within the State of Michigan, without adhering to the burdensome federal reporting requirements (although some requirements still exist).
This Act permits Michigan businesses to raise up to $1 million in any 12-month period, or $2 million in any 12-month period if audited financial statements are available. The Act limits non-accredited investors to purchasing $10,000 worth of securities. The business seeking to qualify for the sale of securities under this bill must be established under Michigan law and authorized to do business in the State.
Michigan’s step forward into equity crowdfunding contains a number of other rules and regulations deserving of their own time and explanation, however, this State has taken a big step to help businesses raise money. The question now: is your business ready to utilize the crowd?