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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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

How to Invest Local

If you’re interested in investing locally, you’ve probably explored credit unions and community banks. The money in community banks goes back out into the community in the form of small business loans. But what are some other options for investing locally?

  1. Angel Investor – If you’re one of the 1% of investors that have a lot of net worth from a successful company or business venture, you can help a start up by becoming an angel investor. Like the name suggests, “angels” invest their own money to make a small business owner’s dream a reality. You are their guardian angel. Most angel investors prefer a focus like food or minority led companies. The sky is the limit.
  2. Community Developed Loan Funds – This is one of the best kept secrets of local investing. Community Developed Loan Funds target under-served and low income neighborhoods. What better way to help a community grow in a positive way than to bring in new business and job opportunities?
  3. Cooperatives – First developed after the industrial revolution, cooperatives are groups of people with similar job sets like ranchers, farmers, brewers, grocers, etc that cooperate or co-op to protect their local interests. They provide loans to the co-op members. By investing in local co-ops, you’d be serving a wide range of businesses at once.
  4. Crowdfunding Local crowdfunding is a hybrid of social media and investment. Most people are familiar with crowdfunded projects like music, tech gadgets, and movies, but a lot of local businesses are turning to crowdfunding to get their product or service to a wider audience. A quick search on any number of popular crowdfunding sites will give you several investment opportunities.
  5. Local Investment Groups –There’s power in numbers. If you want to give a substantial amount of monetary support to local businesses, it may be a good idea to join (or form!) a local investment group. By banding together, your group can help local businesses on a higher scale than you may have been able to just by yourself.
  6. No interest loans – No interest loans fall somewhere between investing and donating to a local business.   The website Kiva popularized the trend of people requesting microloans from potential investors for such things as business supplies and other expenses. The investors get their principal back without interest. Now that dairy farmer can buy more cows thanks to you!
  7. Peer to Peer LendingPeer to Peer (P2P) Lending is gaining popularity. It’s similar to a bank loan except investors loan the person or business the money directly instead of the bank issuing a loan. By cutting out the middle man, the local person or business sees lower interest rates and the investor sees a higher rate of return.  Lending Club and Prosper are two well known P2P sites.

No matter how you decide to invest locally, the important thing is you are giving back to your community members and businesses.   By investing locally, you’re creating a strong foundation of prosperity that everyone benefits from.