[IMGCAP(1)]The trendy new term in the high-tech arena is “crowdfunding.” Both the President and Congress jumped on the crowdfunding bandwagon as a way to show they are doing something about the economy by passing the JOBS Act. What exactly is crowdfunding? Here’s one introduction through the eyes of a professional accountant and auditor.

Essentially, crowdfunding is the ability for a large group of people to band together and make small investments that collectively are enough to fund a startup company. Prior to the act, that wasn’t feasible because the limit on the number of shareholders before having to report as a public company was 500. The legislation not only raises that limit to 2,000, but also excludes investors in crowdfunding transactions from the calculation of shareholders of record. What that means is that there is no limit on the number of investors in a crowdfunding transaction.

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