Welcome to … The Crowdfunding State?

Published on June 20, 2014

CrowdFundingNew Jersey is known as the Garden State but that could change soon. A committee of the New Jersey state assembly—The Assembly Financial Institutions and Insurance Committee—voted on June 5, 2014 to release a bill that would allow private businesses in New Jersey to “crowdfund” through web portals. What is new and important about the New Jersey bill, which was just recently reintroduced, is that it would permit companies to give out shares of equity in return for capital. In other words, investors would be providing equity funding.

Under the bill, total investments cannot exceed one million dollars and single purchaser investments are capped at $5,000 each. This was reported in NJBIZ, a statewide business newspaper, on June 6, 2014.

Since we are still waiting for all provisions in the JOBS Act to be finalized, right now the New Jersey-based bill can only offer intrastate (within New Jersey) crowdfunding. Similar versions have been put forth in states like Georgia, Kansas and Michigan. There is bipartisan support for the New Jersey bill.

State Sen. Joe Kyrillos (R) has been a sponsor and proponent of the measure. He told NJBIZ in May that, “Frankly, there is no reason to embrace laws enacted in the 1930’s that have outlived their usefulness. The economy is still troubled. Financing is hard to come by. Millions of people understand intuitively that when there is a good idea, people would like to risk their capital to make that a success.”

CROWDFUNDING AS A SELF-DIRECTED INVESTMENT VEHICLE

As administrators of self-directed retirement plans, Next Generation Trust Services—based in New Jersey—is watching this measure carefully. Account holders of self-directed IRAs and other retirement plans may make a broad range of alternative investments and high-net-worth individuals have been making equity funding investments through their self-directed accounts for years.

The New Jersey bill could open the door to a much wider population of investors who wish to make equity investments in startup companies through their self-directed retirement plans. We’ll keep you posted on the bill’s progress. In the meantime, you can read more about equity funding opportunities for accredited investors on our blog, and learn all about self-direction as a retirement strategy on our website. If you have any questions about self-directed IRAs, contact Next Generation Trust Services at (888) 857 8058 or Info@NextGenerationTrust.com

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