Intrastate Crowdfunding

Intrastate crowdfunding will now be available to local businesses in Arizona starting July 3rd of this year.

House Bill 2591 & Senate Bill 1450

Governor Doug Ducey signed the two bills into law in March of this year. This allows businesses to raise funds for their company from accredited and unaccredited investors via the Internet.

The bills were written and introduced by Rep. Jeff Weninger (R-PHX) and Sen. David Farnsworth (R-Mesa) with the support of the Arizona Small Business Association based off of legislation in Kentucky.

Federal Measures

The United States Securities and Exchange Commission (SEC) is currently processing a federal crowdfunding measure that is part of the JOBS Act.  This has slowed down the introduction of the law that was passed by Congress in 2012. With no timeline of when it will be accessible to the public, states like Kentucky and Arizona have taken it into their own hands to build a connection between local businesses and potential investors.

Twelve other states have already passed crowdfunding bills with 17 more developing legislation.

How does it work?

Crowdfunding has been gaining popularity in recent years. The public can raise funds for causes, projects, bills, etc. by signing up for one of the many sites being visited by people who want to donate.

Now with business crowdfunding, Arizona companies will be able to invite local residents to invest in them.

How will crowdfunding affect small businesses?

Businesses will be able to raise up to $1 million, or $2.5 million if the business has audited financial statements. Investments from non-accredited lenders will be limited to $10,000. In order to receive the funds, they must raise at least 80% of their intended goal. They will also have to adhere to strict guidelines like submitting a notice and information that includes:

  • A complete explanation of the company
  • Purpose for funds
  • Supplemental information needed by lenders to make an informed decision
  • A website with all of this information

Businesses and lenders cannot have a history of fraud in any state or problems with the SEC.

Exit Strategy

As of now, the new law does not have a way for investors to buy out. A bipartisan task force led by Farnsworth and Steve Farley (D-Tucson) has, among other duties, taken on the responsibility of working through the issue. They are hoping to present ideas to have an exit strategy before the end of the year.

Helping Small Businesses

The expansion into seeking non-accredited lenders is a great opportunity for the local economy. This increases the amount of money available to small businesses and eases the competition for funding from the small pool of accredited lenders. Businesses will now be able to showcase their great potential to those who may have overlooked the innovation going on in Arizona.

Small Business Attorneys at JacksonWhite

How does this change your small business plan? Call the small business lawyers at JacksonWhite today to have representation by your side. Our attorneys can help you understand the legal needs of your small business.

Call JacksonWhite’s Small Business Law Team at (480) 464-1111 to discuss your case today.

Contact Small Business Representation Attorney Dave Weed

Call (480) 464-1111 or fill out our contact form to schedule your consultation today.