New Law Lets Small Businesses Use Crowdfunding
Getting investors means companies will have to take on new responsibilities that may be time-consuming. Shareholders may have questions, concerns, complaints â¿¿ especially those who aren't sophisticated about buying stock in a young company that may not be able to show a profit or pay dividends.
"All of a sudden, you have 500 people who you don't know who you now have to answer to," Scileppi said. So an entrepreneur or small company may need to hire someone to be a liaison for investors
Tom Murphy, an attorney in Chicago with McDermott Will & Emery, another business law firm, said entrepreneurs might find they don't have as much freedom to run their companies as they did before taking on investors. "There will be a lot of things you can't do as cavalierly, like how much you pay yourself," Murphy said.Having shareholders means businesses will need to comply with state laws that govern companies with shareholders, Murphy noted. "They're likely to have to prepare financial information for investors as they go along," he said. That means preparing regular reports on how the company is doing that includes information such as revenue, expenses and profit or losses. Companies also are revealing their plans and finances to potentially millions of people. They could risk having their ideas stolen. However, as Chris Holman, chairman of the National Small Business Association, noted, "you're always going to expose yourself to that" when you seek investors. Joyce Rosenberg can be reached at http://twitter.com/JoyceMRosenberg
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