What is equity crowdfunding?

Last Updated: May 07, 2016 05:08PM CDT

Equity crowdfunding is the name given to the process whereby people (the crowd) invest in a company in exchange for shares.

It is a new capital raising and investing method. Federal equity crowdfunding (Reg CF) enables startups and small businesses to raise up to 1 million capital/year from non-accredited and accredited investors, through funding portals. Non-accredited investors are considered all individuals with an income lower than $200 K/year.

In the US to be considered an accredited investor, one must have a net worth of at least one million US dollars, excluding the value of one's primary residence, or have income at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year.

 

Starting May, 16 2016 when the Regulation Crowdfunding became active, non-accredited investors can be shareholders. 

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