Small Business RULES in Illinois: HB3791 and HB2946

We are all well aware that the majority of job growth and economic activity are driven by small business. From the Wall Street Journal to the New York Time to CNBC, all have ran story after story confirming that small business is the engine that drives economic growth.

One state that has, for the most part, been left behind in the growth of small innovative businesses is Illinois. Budget issues and folks leaving our state have hampered small business growth. What can be done?

Recently we are see legislative changes that have the potential to make a dramatic improvement in this negative phenomenon. In May of 2016, Illinois unanimously passed the Illinois Intrastate Offering Exemption (Illinois Investment Crowdfunding Law HB 3429). State Representative Carol Sente filed the bill written by, Freeborn Peters partner / attorney, Anthony Zeoli supported by the SBAC and (state registered and regulated) Illinois intrastate crowdfunding portal VestLo.com. This major accomplishment now appears to be only the beginning in the move to once again make Illinois the leader in small business growth.

Two new Bills have been introduced to the State Legislature by Carol Sente and the team involved in last years victory. In late October, 2017 the SEC updated Rule 147 (Intrastate Investment Exemption) allowing for improved conditions for Intrastate crowdfunding, by creating Rule 147A. The original rule 147 allowed for some 29 states to enact laws allowing local businesses to raise funds from its neighbor (state residents) without the onerous (and expensive) regulation of the Federal government. Working directly with state regulators, in most cases the individual states, Secretary of State Securities division. The updated rules require the states to amend the current Intrastate crowdfunding laws to take advantage of these positive changes to the federal update.

Illinois, under Carol Sente’s leadership, has taken the lead by filing bill HB 3791 on Feb. 10th, 2017. Among other things, this amendment will allow for companies formed in states other than Illinois (ie. Delaware) who operate and employ in Illinois to raise growth capital under the Illinois Investment crowdfunding law. The new bill which enables for the rules under the new 147A, will also allow companies to receive local investment when complying with one of the 3 requirements (80/80/80 rule) that allow companies to meet the intrastate exemption. Rather than being required to have 80% of revenue, 80% of employees and 80% of use of funds within the state. Now an Illinois small business will only need to meet ONE of these 3 requirements rather than all 3. Yet another advantage of enacting HB 3791 is the ability for small business to use General Solicitation, meaning although investment must come from Illinois residents, companies can advertise their offering without fear of losing the exemption when social medial or other means take the advertisement beyond state lines.

BUT WAIT… There’s MORE (much, much more)

Launched in 2011, the State of Illinois passed the Illinois Angel Tax credit (25% of Angel investments) enabling for $10,000,000 in state tax credits for investors in qualified investment in qualified Illinois based businesses. That law expired effective Dec. 31, 2016.

In a potentially revolutionary move, Rep. Carol Sente along with State Representative Elgie R. Sims, Jr. and Representative Emanuel Chris Welch have filed a bill (HB 2946) to re-instate and IMPROVE the Angel Investment Tax credit to $20,000,000 and run through 2021.
Why is this revolutionary??
Bill HB 2946 allows (and encourages) investment in Illinois business from not only accredited Angel Investors but from ordinary unaccredited Illinois residents!!
Qualifying investment opportunities are required to set aside 25% of the investment to unaccredited investors through the Illinois Investment Crowdfunding law. This encourages Angel investors to “slice off a piece” of their vetted investments allowing participation to regular citizens through a registered Illinois Intrastate Investment Crowdfunding Portal. The new bill also loosens the requirements for businesses eligible for the Illinois Angel Tax credit to extend beyond Technology companies to include wholesale, retail, hospitality and more. If enacted this Illinois law will be the 1st of its type in the United States, modeled after the run-away success of the equity crowdfunding tax credit in the United Kingdom. Small business investment exploded in the UK following enactment of their small business investment tax credit.

This law would help to fulfill the vision of VestLo, Anthony Zeoli and the Small Business Advocacy Council by encouraging Angel Investors and Angel groups to include Illinois residents of average means to participate in the types of small business private investments that have the potential to create real wealth and growth in Illinois.

We encourage EVERY Illinois resident to contact your local State Representative, State Senator and Governor Rauner to support these incredible bills to become the Law. They have the potential to truly impact the economy and job growth in Illinois.

Disclaimer: The author of this article is neither an Accountant or and Attorney. Illinois Business owners and Investors are encouraged to speak with a licensed Attorney and/or CPA before filing for this type of Tax credit / Tax incentive when available.

 

 

 

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Huge Step for “Invest Local Illinois”

In the instant gratification mindset of today, it’s often a challenge to remember that real change takes time. No where is this truer than in the highly regulated world of finance. Around 18 months ago the state of Illinois passed perhaps the most business and investor friendly Intrastate Investment crowdfunding law in the country. Those rules went in to effect on January 1, 2016 and since that day people have been anxiously waiting to see a local small business utilize these rules to raise growth capital.

Well…. The wait is over!!

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Cardfrenzy, a retail chain of card and gift shops has listed an offering with Illinois registered investment portal VestLo. Cardfrenzy working to raise up to $500,000 from its customers and neighbors to fund the growth of its franchise program operations.

Investment in the Cardfrenzy Franchise program is exclusively for Illinois residents. You can view the the offering here:

https://vestlo.com/deal/cardfrenzy-franchising-program

Always remember that investing comes with risk. Especially when looking at investments in small privately held companies. Please be sure to review all the documents and financials prior to making any investment. It is an investors responsibility to do their own due-diligence. We never offer investment advice but we LOVE the idea of Illinois citizens supporting Illinois businesses.

 

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Illinois Equity Crowdfunding is now available

Originally posted at Crowdfunding-Website-Reviews the applications and final rules for both issuers and portals has now become available. The most dynamic intrastate crowdfunding rule in the nation is now effective. All needed rules and regulations have been provided by the Illinois Secretary of State and Issuers are lining up to take advantage of this new capital raising tool.

UPDATE #3: The long awaited final rules and applications from the Illinois Secretary of State have finally arrives. One portal, VestLo, has announced that they have submitted their application to act as an Illinois Intrastate Equity Portal through this press release. We have been rather surprised that the local Chicago news has not yet written on this exciting new development. The Portal and Issuer applications can be found on the Secretary of States website. You can find all Illinois Equity Crowdfunding Forms. To go directly to the issuer registration form, it can be found here. With Illinois companies having the ability to raise $4mm vs the federal crowdfunding laws being limited to $1mm raise. The Illinois law has come big advantages over the JOBS Act. Our expectation is for the Illinois law to be the proof that intrastate will be a real option for businesses based in Chicago and around the State.

UPDATE #2: Looks like we can expect the administrative rules, portal application and issuer application to be released by the Illinois Secretary of State by April 1st, 2016. We are expecting 3-4 portals to be applying to the state under HB 3429 (Illinois INTRASTATE OFFERINGS EXEMPTION aka The Illinois Investment Crowdfunding law) on the 1st day the application is made available. There appears to be more excitement surrounding the Illinois law than we have found in any of the other 29 states with intrastate crowdfunding has been enacted. Portals have already begun marketing efforts to attract both issuing companies and Illinois investors. A few of these portals seem to include truCrowd (also operating in Texas), VestLo and a couple more portals that have asked us to “keep things quiet” until the final rules are released.

UPDATE: Illinois HB 3429 – Illinois Equity Crowdfunding has passed both the State House and Senate unanimously as of May 20, 2015. The bill is on its way to Governor Bruce Rauner to be signed in to law. We have total confidence that our business friendly governor will have no reservations signing this bill and helping to expedite its implementation. The Illinois intrastate equity crowdfunding bill is the most aggressive attempt of any state bill to encourage the invest-local movement.
Check back often for updates on this exciting new time for Illinois small business and investors as we will be following this very closely. More Info

What is the Illinois Equity Crowdfunding Law

Have you heard of the Illinois Intrastate Crowdfunding Law? If you’re a small or medium sized business in Illinois, it may be a great opportunity to grow your capital. Recently approved by the House and the Senate unanimously, signed in to law by the governor this is an exciting announcement for entrepreneurs, investors and venture capitalists.

In today’s article we’ll discuss what the Illinois Intrastate Crowdfunding Law is, what the Bill means for SME’s and how you can use it as an opportunity for your business.

What is the Illinois Intrastate Crowdfunding Law?

This Bill essentially allows businesses in Illinois to actively solicit crowdfunded capital from local residents, in exchange for equity in their business. The maximum allowed investment from each investor is $5,000, whilst a company can raise $1 million in a year, with the potential for $4 million if they provide a financial statement for investors.

This differs substantially from popular existing crowdfunding websites like Kickstarter because the capital they raise is no longer from ‘accredited investors’, it can be from anyone who lives in Illinois. Illinois residents also receive debt/equity from the company they invest in, which isn’t usually the case with traditional crowdfunding websites.

What the Law means for SME’s & precautions

If you’re a business owner and you’re looking for investment, this is truly a great opportunity for you. This Bill could give you access to millions of dollars of new capital, growing your business via local residents who are passionate about entrepreneurialism in Illinois.

It is important however to understand that there should be some element of caution with this Bill. Investors may have expectations in terms of influencing how the business is run or returns on their investment. Businesses should also ensure they are complying to the Bill’s legislative requirements before soliciting local residents.

Additionally, if you are soliciting investment from local residents, you may have to disclose certain elements of your businesses’ performance and financial data. If you do this, understand that as you’re approaching local residents they are members are of the general public and therefore your competitors or other key stakeholders may also find out. Subsequently, only disclose information regarding your company that you are comfortable about being public.

How you can use the Law as an opportunity for your business

This may be a better alternative than receiving investment via a huge funding firm because you’re giving ownership to potential customers who can offer insight, feedback and new ideas. They’re passionate about living in the state, they want to see their local area invested in and they can now have a vital role in the growth of Illinois. It’s essentially empowering local residents to make a difference and improve the state of Illinois, whilst investing in a business they love, creating a sense of public spirit.

Summary:

As you can see, the Bill is a great opportunity for SMEs in Illinois to gain investment from potential customers passionate about developing their local area. If you have any questions about the legislation, please feel free to ask and we’ll be happy to help. Receive a FREE Guide on Illinois Equity Crowdfunding – Here

Illinois Intrastate Investment Crowdfunding

On Jan. 1st 2016 the Illinois equity crowdfunding law became effective. In a state with a reputation for being unfriendly to business and overprotective of its citizens, Illinois legislators passed the most aggressive intrastate crowdfunding law in the country. Title III of the Jobs Act which legalized investment crowdfunding limits companies to raising $1mm in a 12 month period and has strict limits on the amounts that both accredited and unaccredited investors can invest. In some cases limiting investors to $2,500 in aggregate (all investments) in a 12 month period. The Illinois crowdfunding law allows companies registered and operating  in Illinois to raise up to $4mm a year. Illinois residents who are unaccredited can invest up to $5,000 per deal while accredited investors have no limit to the amount in which they can fund offering companies.

Although the Illinois law became effective on January 1st, companies and investors have been waiting for the Illinois Secretary of State to release the administrative rules and applications for capital raises to being. The delay does not come without a potential payoff. The Secretary of State will have the ability to update the rules and regulations within the law as they gauge what is needed to allow this new market to flourish. We are excited to announce that we fully expect the rules to be released by April 1st.

As we await these rules we are beginning to find news stories and landing pages for Illinois crowdfunding portals. Portals are the mandatory internet intermediaries that must host any Illinois company looking to raise capital using the crowdfunding exemption (which operated under federal rule 147). So far we have come across many developers offering to create internet portals including crowdforce and crowdfundconnect. We have seen that truCrowd (who also operated an intrastate portal in Texas) say they will be entering the market and VestLo who will be operating a custom created Illinois portal operating out of 1871 (famous Chicago startup co-working space). VestLo will be working with the author of the Illinois crowdfunding law, attorney Anthony Zeoli and Axia Law, one of the leading law firms for Chicago based tech startups.

We are very excited to watch this new fundraising mechanism put to use in Illinois as it will quickly become the most powerful tool in the Invest Local Illinois movement. The law (Illinois HB 3429)is designed to allow and encourage investment in local communities by the customers who frequent the businesses looking to raise capital and grow.

Presentation explaining the Illinois equity crowdfunding law.

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