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Crowdsourcing represents a revolutionary development in the field of capitalization and funding of new business enterprises, in particular those connected with the Internet. However, with the raising of finance capital through crowdsourcing/crowdfunding being a very recent phenomenon that remains in its infancy, with the rules and regulations pertaining to such financing still developing and being subject to further modification [the United States' Securities & Exchange Commission having yet to establish the specifics of its crowdfunding plan, as was instigated by the Jumpstart Our Business Startups (JOBS) Act of 2012). (Note 1)

The proposal put forth by the Securities & Exchange Commission ("SEC") would be to create a new financial entity - a funding portal, which would act as a website that would connect investors through the Internet with emergent companies seeking to raise capital (money). Under the proposal, the SEC would open up crowdfunding to the public, while striving to confer a degree of investor protection to those seeking to make such investments.

The initial proposal puts forth some suggested limitations on what a company would be able to raise through crowdfunding (and when rules are enacted, these will be legal limitations associated with crowdsourcing fund generation). As of 2013, the SEC's proposal was to limit a company's ability to raise money through crowdfunding to One Million Dollars per twelve month cycle. With respect to investors, investors having an annual net income or net worth of less than One Hundred Thousand Dollars, would be allowed in every twelve month cycle to invest  the greater of five percent of their annual net income or Two Thousand Dollars. Investors having an annual income or net worth in excess of One Hundred Thousand Dollars would be entitled to invest up to ten percent of their annual net income in every twelve month cycle. Another proposal is that corporate securities of the offering company bought through the proposed portals would have to be held a year before being sold.

For a new business enterprise, funding through an Internet-based crowdsourcing strategy can be a highly effective approach to generating much needed start-up funds. Nevertheless, there is also the possibility that too much can be given away in the money generating process. At Neufeld Legal PC we understand the importance of balancing competing interests when seeking monetary funding via crowdsourcing [offering something of value versus giving away too much; generating interest in the new venture versus overstating the possibilities, etc.].

 With this recognition of the realities and challenges associated with financing via crowdsourcing and the Internet, our law firm strives to provide the legal / contractual framework and associated legal advice, including:

- advising and planning the crowdfunding offering (in particular avoiding giving away too much in the offering)

- drafting the appropriate documentation for the company and its crowdfunding

- structuring the underlying business corporation (providing proper protections to the founders of the company)

- planning the future of the company such that it is able to grow after the infusion of capital from the investment realized from crowdfunding

- dealing with the ongoing corporate and legal matters associated with a company that seeking to grow while meeting the challenges of multiple laws and regulations 

To contact the law firm of Neufeld Legal P.C. with respect to your company seeking to raising funds through crowdsourcing via the Internet, contact Neufeld Legal P.C.


New York City phone no.       646-663-5567

Toronto, Ontario phone no.    416-887-9702

Calgary, Alberta phone no.     403-400-4092

Note 1: As of 2013, there has yet to be comparable legislation in Canada enacted that would allow Canadians who were not accredited investors to invest via crowdsourcing, such that opportunity to pursue this avenue for raising capital. Meanwhile, in the United States of America, until actual rules have been enacted by the SEC (which they say are forthcoming), it is still not legally permissible to raise capital via crowdfunding.

Providing legal and business counsel to internet businesses, primarily in Canada and the United States of America, but also where legally permissible to provide the applicable advice and consultation to business people the the world over. Internet business lawyer Christopher Neufeld is admitted to practice in New York State, the provinces of Alberta and Ontario, in addition to the U.S. Court of International Trade, U.S. Tax Court, U.S. Court of Claims, U.S. Court of Appeals: Federal Circuit, U.S. District Court: Southern & Eastern Districts of New York, as well as appearing before the World Intellectual Property Organization (WIPO) . The legal operations of Neufeld Legal P.C. are headquartered in Calgary, Alberta, Canada (144 - 4th Avenue SW, Suite 1600, Calgary, Alberta). Legal Disclaimer. Privacy Policy. Copyright 2013.