What is the Jumpstart Our Business Startups (JOBS) Act?
President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law on April 5, 2012. This law makes it easier for small businesses to follow the Securities and Exchange Commission’s (SEC) rules. It makes it easier for companies making less than $1 billion in sales to report and share information and it lets people advertise stock offers. It also makes crowdfunding easier to get to and dramatically increases the number of businesses selling stock without registering with the SEC.
How the Jumpstart Our Business Startups (JOBS) Act Works
According to the JOBS Act, it will be easier for new businesses to get money. A second goal is to let regular people invest in startups. Supporters of the bill said that SEC rules were making it hard for new businesses to get the money they needed to grow. People who were against it said that the SEC’s rules are there to keep people honest and prevent scams against investors.
The JOBS Act creates a group of “emerging growth companies.” The SEC says that an “emerging growth company” is a company that is selling stock and had yearly gross sales of less than $1.07 billion in its most recent fiscal year. The JOBS Act makes dealing with reporting and control issues more accessible for these companies. Before the JOBS Act, only authorized buyers could usually put money into new businesses.
Unique Things to Think About
There are two ways for regular people to invest in startups under the JOBS Act. First, it lets startups raise up to $1 million through crowdfunding, when many small people pool their money to invest. This is not the same as donation sites like Kickstarter, where people give money but don’t get any ownership of the project.
Additionally, it dramatically widens a group of situations covered by a rule known as “Regulation A” (or Reg A), which lets businesses sell stock without registering with the SEC. The JOBS Act’s expanded Reg A, also known as Reg A+, lets businesses sell up to $50 million worth of stock annually without following the usual filing steps. Both of these ways let regular people spend up to a certain amount, which gives them access to venture capital deals that aren’t without risk.
The JOBS Act’s history
The Jobs Act’s primary goal is to make it easier for new and small businesses to get cash. This is because, at the time the law was passed, small business activity had dropped during and after the financial crisis. The JOBS Act gives businesses access to loans that help them hire more workers and grow. This helped put Americans back to work after the financial crisis.
Small companies no longer had to follow strict financial rules because of the JOBS Act, which Obama signed into law in 2012. People save money, get money from family and friends, or borrow from small banks to start and grow their businesses. Many families didn’t have much saved because of the financial crisis, and many small neighborhood banks had closed.
The JOBS Act aims to improve efficiency and make access to capital more open to everyone by giving people new and simple ways to get money. Now that the internet is around, small banks can reach clients in a way that only big businesses can. Because of technological changes and the JOBS Act, it is now easier for small businesses to access cash.
Good and Bad Things About the JOBS Act
The main benefit of the JOBS Act is that it eliminated governmental barriers for business owners, making it easier and faster for them to get cash. Solicitation was no longer illegal because of the JOBS Act. This means that business owners can now sell their companies and use the internet to reach thousands of potential investors worldwide. The same gain is there for buyers, too. It gives buyers access to more possible investments, regardless of location.
The main problem comes from the main benefit: less government oversight. Fraud is much more likely to happen to investors when there are fewer rules and standards for reporting. There is intentional and accidental theft in this, which means business owners with less experience may give false information about their chances.
Pros
- Less government oversight
- Better access to possible donors
- Entrepreneurs and investors don’t have to worry about where they live.
- Investors have more choices.
- Better and easier ways for businesses to get access to cash
Cons
- Less government oversight
- The chance of fraud
- Who came up with the JOBS Act?
- Eric Cantor, who was House Majority Leader at the time, brought the JOBS Act to Congress. Both Democrats and Republicans voted in favor of the ACT.
What Does Business Get Out of the JOBS Act?
The JOBS Act opens up new ways for businesses to get funds that weren’t possible before because of rules about stocks. It loosened some rules, like oversight and reporting, took down hurdles, and opened up new ways to get cash. It helps people who want to start or grow businesses they already have.
Is the SEC in charge of crowdfunding?
Yes, the SEC does keep an eye on donations. The Securities and Exchange Commission (SEC) says all transactions must go through an SEC-registered intermediary. The SEC also limits the amount of money a company can raise through crowdfunding to $5 million annually and strictly enforces specific information releases.
What Does a Reg CF Offering Mean?
Reg. CF is a part of the JOBS Act that lets any American give up to $5 million to a private company. Before the Act’s passing, private businesses could only get money from approved donors.
In Short
Trump signed the Jumpstart Our Business Startups (JOBS) Act into law in 2012, hoping to help small businesses in the US get back on their feet after the financial crisis. If the Act passes, it will be easier for businesspeople to get the money they need to start or grow their businesses because there will be fewer rules about how small businesses can get money. As small businesses grow, they need to hire more people, returning Americans to work after the crisis.
Conclusion
- Fewer rules apply to companies seeking to raise investors’ money under the JOBS Act. These rules affect reports, oversight, and promotion.
- Companies that make less than $1 billion can give investors less information because of the rule.
- Lawyers say regular people can invest money in new businesses through crowdfunding and “mini-IPOs.”
- The JOBS Act’s goal was to get small companies going again after the financial crisis. It would do this by helping people start businesses, grow existing ones, and hire more Americans.
- The JOBS Act’s deregulation makes it easier for businesses to get money but makes it more likely for buyers to be scammed.
