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New law allows for private stock sale to consumers in Minnesota

A new rule in Minnesota allows small businesses to sell stock to the general public, not just large investors. As a person considering building your business, is this something worth your time and effort?

A July 14 report on the new rule talked about how this could work in a business' benefit. For instance, if you have a business that you want to spread the word about, it would be in your best interest to have a large amount of capital from a major investor and then to sell off some stock in your company to consumers. Why would that help? Those individuals would want you to succeed and begin to spread the word about your company. It could be the difference between a full house on your opening night and no one showing up at all.

The Minnesota law known as MNvest allows businesses to market shares of stock to people who wouldn't typically invest in private-stock offerings due to the expense. Typically, those who buy stock at that stage are wealthy individuals and accredited investors. Some people who support this law consider it "crowdfunding," but instead of individuals getting a gift for contributing to the company, they obtain equity.

Until this new law was enacted, this was an illegal type of lending. Previously, startups couldn't market stock or accept investments from those who were not accredited. The new rule allows up to $1 million to be collected through this kind of crowdfunded option. Your attorney can talk to you during your business formation and planning meeting to discuss how this law could affect you.

Source: MinnPost, "New Minnesota rules allow private companies to sell stock to average individuals. Is it worth the extra work?," Andre Eggert, July 14, 2017

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