Starting a new business is hard, and finding the funding to get that business off the ground can be one of the hardest parts. Recognizing the challenges faced by financing a business in West Virginia (WV), in 2016, the West Virginia Legislature passed the WV Small Business Capital Act (the “Act”), codified at Chapter 32, Article 5 of the West Virginia Code.
The WV Small Business Capital Act, also known as the Intrastate Crowdfunding Act, is intended to encourage small business funding by locals interested in seeing new businesses thrive in their communities. The Act allows new and unique methods of finding start-up capital.
How Does the WV Small Business Capital Act Work?
The Act exempts the offer and sale of certain securities from certain state statutory securities requirements. Specifically, the offer and sale of a security are exempt from the requirements of the West Virginia Uniform Securities Act if the issuer, purchaser, offer and sale meet the following requirements:
(1) The issuer is a for-profit entity organized under the laws of West Virginia with its principal place of business in West Virginia, is registered with the West Virginia Secretary of State and derives at least 80% of its operating revenue from inside West Virginia;
(2) The purchaser is a West Virginia resident or an entity organized under the laws of West Virginia with its principal place of business in West Virginia;
(3) The purchaser does not acquire more than $25,000 in securities from the issuer, provided that the purchaser is not an accredited investor;
(5) The sum of all cash and other consideration received by the issuer from the issuance of securities under the Act does not exceed $1 million.
Equity Crowdfunding in West Virginia
What the WV Small Business Capital Act means in practice is being played out under intrastate or equity crowdfunding legislation all over the country as communities come together to invest in what they are interested in and what they believe is needed locally. The concept is as simple as it is creative: individuals make small contributions, and those individuals then obtain a partial ownership in the company. Instead of walking away with a product, people are walking away with an ownership interest in something they believe will benefit their community.
Collaborative funding in West Virginia will have its own local flair, with businesses that reflect the style and needs of the people who will be using them. With instrastate crowdfunding in WV, community members can help each other by supporting local start-ups or small businesses that meet local business needs or otherwise benefit the community.
Do You Need Help Understanding the WV Small Business Capital Act?
When your business is getting off the ground, you need sound business legal advice from the experienced business law attorneys of Jenkins Fenstermaker, PLLC. If you have questions about the WV Small Business Capital Act or growing your business in West Virginia, contact me, Rachel Turner. You may call me directly at (866) 617-4736 or complete our firm’s Contact form to discuss your concerns.