In 2012, former President Barack Obama signed into law the Jumpstart Our Business Startups or JOBS Act. The JOBS Act was a bipartisan project led by Obama and Congress, as a way to promote American businesses, entrepreneurship and protect business investors.
The JOBS Act works as a way for small businesses and entrepreneurs to leverage the use of crowdfunding, democratizing access to capital subject to rules and regulations laid out by the U.S. Securities and Exchange Commission (SEC).
Additionally, the JOBS Act oversees the expansion of mini public offerings, allowing smaller companies and businesses to raise capital consistently with regular investor involvement. The previous regulations by SEC requirements allowed businesses to raise less than $5 million in a public offering, the JOBS Act raised the threshold to $50 million.
Another part of this act is to create an IPO on-ramp, that now makes it easier for smaller, high-growth startups to go public. This is known as the incubation period, for a new class of “Emerging Growth Companies.” Instead of these companies having two years to comply with Sarbanes-Oxley auditing requirements, the period has now been increased to five years.
By simpler means, the Jumpstart Our Business Startups Act is to increase the utilization of crowdfunding initiatives via the internet and social media for businesses. Making it easier for them to access investor capital through crowdfunding, or offering investors stocks or shares through an IPO.
According to definitions outlined by the Securities Act and the Exchange Act, businesses or companies that issue a “total annual gross revenue” of less than $1 billion during their recent fiscal year are considered emerging growth companies.
The implementation and monitoring of the JOBS Act are conducted through the joint participation of the Treasury Department, Small Business Administration, and the Department of Justice alongside the Securities and Exchange Commission.
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