The Jumpstart Our Business Startups Act (JOBS Act) was developed to help small companies generate capital, expand their business, and produce private jobs. The Act was intended to motivate investment in new and startup businesses and lessen the previously burdensome reporting requirements upon smaller publicly traded companies.
The following benefits were a result of the JOBS Act:
More Investors Allowed to Participate
As a result of the JOBS Act, private placements of equity are more available to small investors than ever. Before the Act, only small groups of 35 investors or less, or accredited investors, or investors with an existing special relationship with the company could invest in non-private startup businesses. The restrictions disappeared by passing the Jumpstart Our Business Startups Act.
More Capital Invested in Startups
The quantity of capital that can be invested in a startup is significantly increased under the JOBS Act. Small entrepreneurs and companies are enabled to solicit investments successfully from a bigger pie of potential investors due to the minimal restrictions on advertising and solicitation, and crowdfunding. Under the JOBS Act, almost any individual with a high net worth may invest in a private placement offering. Previous to the JOBS Act, the available pool for private offerings was limited to investors having a minimum $1 million net worth.
More Capital Leading to More Startups and Employees
Entrepreneurs can generate funding as a result of less expense and complexity, creating more startup businesses and new employee hires. The JOBS Act delays or removes the frequent and burdensome filing requirements, bypassing registration, and eliminating regulatory approval. Removing restrictions translates into more businesses that are inclined to go public.
Companies Can Increase Profitability Without Going Public
Businesses can raise capital without going public due to the increased limit on shareholders before registration, from 500 to 2,000. This benefit resulting from the Jumpstart Our Business Startups Act enables companies to retain their private enterprise status and enhance their balance sheets until the right opportunity arises for a public offering.
Employees Compensated With Stock
Private companies that choose to postpone a public offering can compensate their employees with stock, for the time being. This enables businesses to increase stock ownership throughout the company without the need to comply with expensive reporting and registration requirements.
Stronger Banks That Encourage New Lending
New capital increases the strength of banks and encourages new lending in the business marketplace. This has helped solve the problem of banks tightening credit standards and the resulting reduction of loans to small businesses.
As one can see, the Jumpstart Our Business Startups Act has delivered a range of benefits for companies, investors, and the economy.