Crowdfunding is a powerful method for digital fundraising that provides a valuable opportunity to gather financial support from a variety of sources. Since the concept first took off over a decade ago, participation has skyrocketed. Top crowdfunding site, Kickstarter, for example, reported total pledges of $4,787,016,823 as of February 2020. This is only the beginning: data from Fundly suggests that the market will reach $300 billion by 2025.


Inspirational tales of crowdfunding success abound. PopSockets, for example, owes its success to a groundbreaking Kickstarter campaign. Likewise, Oculus VR raised an impressive $2.4 million via crowdfunding. These results were sparked, in part, by the company’s generous offer of “dev kit” editions of the Oculus Rift in exchange for sizable contributions. This wildly successful campaign demonstrated the potential of crowdfunding as an alternative strategy for gaining critical financial support.


Crowdfunding for small businesses: opportunities and obstacles

Most people agree that crowdfunding benefits society by allowing small businesses to gain the resources and exposure they need. Othersare concerned about the legality of the practice, which remains poorly regulated. Murky legislation and limited oversight may prompt potentially generous contributors to back away from promising campaigns.


At the business level, crowdfunding concerns largely involve compliance issues. While this fundraising method can prove lucrative for startups seeking quick cash infusions, they shouldn’t approach it haphazardly. Different issues may arise depending on the type of campaign, but the following crowdfunding legal concerns are especially common.



  • The potential for personal liability


Crowdfunding platforms make every effort to avoid liability. This leaves organizations or individuals seeking support at risk, especially if funding secured through crowdfunding sites is processed through a personal account. In most cases, it’s advisable to set up a business entity as an LLC rather than to remain a sole proprietor by default. Following small business formation, payments can be processed on an official basis. This limits the potential for personal liability.



  • Intellectual property disputes


Marketing for crowdfunding campaigns often involves photos or videos, which may include footage or music that campaigners are not actually permitted to use. Individuals or organizations should carefully vet potentially problematic intellectual property to determine whether such material is permissible under fair use—or whether they should contact artists to make licensing arrangements. Names and slogans should also be researched thoroughly. 


On the flip side, crowdfunding efforts can increase the potential for others to discover and use a campaign’s key concepts without permission. For this reason, it’s worthwhile to seek necessary copyrights or patents prior to embarking on ambitious crowdfunding efforts.



  • Tax liabilities


The IRS deems all monetary gains from crowdfunding as income, not gifts. Taxes must be paid on all funds obtained through these campaigns. PayPal and other payment processors typically send an  IRS Form 1099-K as soon as campaigns reach 200 transactions and $20,000 in gross income. If secured funding falls below this threshold or is handled without the use of a major payment processor, it must still be reported to the IRS.



  • Equity crowdfunding concerns


Early approaches to crowdfunding largely involved product pre-sales. They were therefore not regarded as investments in the eyes of the Securities and Exchange Commission (SEC). More recently, however, equity crowdfunding efforts sparked by the Jumpstart Our Business Startups (JOBS) Act have prompted greater involvement from the SEC. Exemptions from federal security law may occur with the following stipulations:



  • Crowdfunding organizations are permitted to raise up to $1 million within a 12-month period.
  • Individual contributions are capped based on investors’ income or net worth, with a total limit of $100,000 applied to all campaigns within a 12-month period.


  • Exemptions do not apply to companies based outside of the United States.


Organizations that pursue exemptions must file detailed offering statements, progress updates, and annual reports. Significant limits still apply for advertising campaigns related to crowdfunding efforts.



  • How to protect yourself and your business


Your eagerness to follow in the footsteps of PopSockets and Oculus VR is understandable, but caution is critical when dealing with the risky world of crowdfunding. Thankfully, numerous options are available for protecting your concept and your finances. 


As previously mentioned, business formation is a critical first step. From there, work with an attorney to secure your intellectual property and avoid inadvertently infringing on somebody else’s copyright.


With due diligence, it is possible to harness the benefits of crowdfunding without sparking legal drama. Before getting caught up in the excitement of this potentially profitable approach, take some time to thoroughly examine the legal implications and seek assistance as needed. This effort could save you a lot of grief down the road.


The post Is crowdfunding legal? appeared first on AvvoStories.

Leave a Reply

  1. coronavirus ivermectin

    ivermectin for parasites [url=]where to buy ivermectin pills [/url] ivermectin in cats for ear mites how long dies it take for ivermectin to kill scabies

  2. albuterol warnings

    ventolin 90 mcg [url=]can i buy ventolin over the counter in canada [/url] why is albuterol so expensive what is the difference between ventolin and albuterol

  3. amoxicillin and constipation

    amoxicillin capsule [url=]amoxicillin no prescipion [/url] amoxicillin / clavulanic acid side effects how long is amoxicillin suspension good for

  4. lasix fluid pills

    lasix intravenous dosage [url=]buy 40mg lasix online [/url] inj lasix mechanism of action what is furosemide 40 mg tablets used for

  5. azithromycin davis pdf

    zithromax 500mg price [url=]purchase zithromax [/url] what std does azithromycin treat how to take azithromycin

  6. oral doxycycline

    doxycycline reddit [url=]100 mg doxycycline [/url] doxycycline for rocky mountain spotted fever what happens if you lie down after taking doxycycline?

  7. prednisolone use

    prednisolone side affects [url=]prednisolone tablets over the counter [/url] prednisolone for dogs buy online uk what is prednisolone used for in adults

  8. doxycycline hydrate

    syphilis treatment doxycycline doxycycline in mexico can you buy doxycycline over the counter how to treat heartworms with ivermectin and doxycycline

  9. clomid vs anastrozole

    clomid and robitussin [url=]clomid without prescription uk [/url] can clomid delay your period where to get clomid uk

  10. prednisolone 15mg 5ml

    prednisolone ophthalmic solution prednisolone buy usa prednisolone 5 mg for cats prednisolone 5mg equals how much prednisone

  11. Fbshgeomi

    [url=]what is thesis writing[/url] writing a good thesis mba thesis write thesis

  12. priligy pastillas

    priligy sözlük [url=]dapoxetine over the counter uk [/url] priligy dapoxetina 30mg nos eua what is dapoxetine

  13. problems with diflucan

    alcohol and diflucan [url=]can you buy diflucan in mexico [/url] diflucan dose for vaginal yeast infection what is diflucan 150 mg used for

  14. Jvbdfunse

    [url=]scholarship essay writing service[/url] mba essay review service essays writing service are essay writing services legal

  15. synthroid dosing

    synthroid anxiety [url=]synthroid 25 mcg tablet [/url] weight loss after starting synthroid how to take synthroid at night

  16. Lmoppgeomi

    [url=]best essay writing website[/url] instant essay writer best writing service who can i pay to write my essay

  17. Grvfunse

    [url=]recreational viagra[/url] [url=]what is viagra[/url] [url=]what does cialis look like[/url] [url=]buy generic cialis online[/url] [url=]what cialis[/url]

  18. Abgcgeomi

    [url=]best thesis writing services[/url] uk thesis thesis writing the thesis

  19. Brfgfruh

    [url=]cialis for men[/url] [url=]generic cialis reviews[/url] [url=]sildenafil vs viagra[/url] [url=]goodrx viagra[/url] [url=]cialis 5mg[/url]

  20. Lenora Finnerty

    I’m truly enjoying the design and layout of your blog. It’s a very easy on the eyes which makes it much more enjoyable for me to come here and visit more often. Did you hire out a designer to create your theme? Fantastic work!

  21. Abgcgeomi

    [url=]thesis writing service[/url] help me write a thesis thesis support phd by thesis only

  22. dangers of propecia

    propecia gynecomastia [url=]buy propecia online [/url] best contacts for propecia review what is the propecia dosage for hair loss

  23. Remona Brewer

    Sizde oldukça net üzerinden araştırma yaparak en iyi leke kremi markasını mı araştırıyorsunuz? Cilt lekeleri ve tüm vücüdunuzda oluşan lekelere karşı en iyi leke kremini dan temin edebilirsiniz!

  24. plaquenil discount

    diarrhea from metformin [url=]on line no prescription metformin [/url] metformin hcl vs metformin er when is the best time to take metformin er

  25. buy neurontin online

    metformin reviews metformin hcl can i stop taking metformin cold turkey what are the effects of metformin

  26. metformin prices

    neurontin for [url=]gabapentin for sale uk [/url] will neurontin help back pain what does gabapentin have in it

  27. 2666 gabapentin

    paxil recreational use [url=]paxil from canada [/url] paxil for anxiety side effects how many 0.5mg ativan equal 37.5 paxil cr

  28. 250 mg metformin

    coronavirus plaquenil [url=]plaquenil drug [/url] hydroxychloroquine cost 200 mg vs plaquenil what is the drug plaquenil

  29. TimothyPreot

    chat free dating site
    [url=””]free local dates [/url]