Category Archives: Regulations

SEC Finalizes Equity Crowdfunding Rules Opening the Door to Additional Capital for Small Businesses

Posted on by
Reply

crowdfundingCrowdfunding is not new to businesses.  You have likely seen or participated in campaigns to help companies bring their idea to market or to grow their business.  In return for a small investment, you receive a product, gift or service in exchange.  This is known as rewards-based crowdfunding, which began to become a viable avenue for raising funds for businesses in 2009 with the launch of a number of crowdfunding platforms like Kickstarter and Indiegogo.

With new rules from the SEC, crowdfunding is now getting an upgrade.  Equity crowdfunding allows a business to seek capital from a diverse group of investors through a “funding portal” and provides investors with an equity stake or stock in the business. Crowdfunding transactions are exempt from the complex and expensive securities registration process. These transactions could be a simpler equity financing option for small businesses; however, the total costs that small firms will incur from a crowdfunding offering are still unclear.

The Securities and Exchange Commission (SEC), who oversees the process, issued a long-awaited final rule on equity crowdfunding that will be effective January 29, 2016.  Highlights of the new requirement include:

  • Small businesses can raise up to $1 million in a twelve-month period and must disclose:
    • Financial statements
    • How the proceeds from the offering will be used
    • Corporate officers and directors
  • Limits the amount an investor can spend to:
    • Greater of $2,000 or 5% of their annual income or net worth (whichever is less) if both are below $100,000
    • 10% of their annual income or net worth (whichever is less) if both are equal to or more than $100,000
    • A total of $100,000 aggregate investments during a 12-month period
  • Requires funding portals to register with the Financial Industry Regulatory authority (FINRA) and:
    • Provide educational materials on how the funding portal operates
    • Disclose how the portal is compensated
    • Provide disclosures from the offering business

WIPP has been a strong advocate for finalized crowdfunding rules, having included the priority in the recently issued Access to Capital Platform. The SEC’s rule will allow small businesses to raise capital through investment without triggering federal securities laws and registration requirements.

For more information, please see SEC Chair Mary Jo White’s statement on Crowdfunding regulation.

Additional resources:

Patents, Trademarks, Copyrights … Protect Your Intellectual Property

Posted on by
Reply

A spark of an idea is often the start for building a business. Next steps that come to mind to most people are preparing a business plan, sales and distribution model, marketing strategy, plan for building customer base, etc. However one area that is not always as straightforward is protection of the business idea, business name, or an invention from competitors. Or actually protection of everything that is encompassed by one powerful term – Intellectual Property (IP).

We all know the term but what exactly does it incorporates? According to the World Intellectual Property Organization, “IP refers to creations of the mind, such as inventions, literary and artistic works, symbols, names, images, and designs used in commerce.” Globally IP is divided into 2 main groups – Industrial Property (patents, trademarks, industrial designs, and geographical indications) and Copyright that covers literary and artistic works such as novels, films, music, architectural designs and web pages.

USA accounts for the largest share of filed patents and trademarks applications worldwide with 28,7% and 13,8% respectively as reported by the World Intellectual Property Organization.

Screen Shot 2015-09-11 at 11.58.47 AMHowever due to complexity of IP processes small businesses account for only small proportion of the numbers. They are usually not properly protected and thus are more vulnerable to piracy, counterfeiting, and the theft of their intellectual property. Small business owners often simply don’t have access to the IP protection know-how that larger corporations do.

And according to statistics of Small Business Administration this is even truer for small businesses, which are exporting their products overseas. Only 15 percent of exporters realize that a U.S. patent only provides protection in the U.S.

Below are the basics to be followed for protecting IP overseas:

  • Overseas Patents – Almost every country has its own patent law with specific patent application process, which needs to be followed. More information about filing for an overseas patent can be found here .
  • International Trademarks – in certain countries (defined by the Madrid Protocol) trademark registration can be filed via a single application, if you are already a qualified owner of a trademark application pending before the U.S. Patent Office. If you want to protect your trademark overseas you’ll need to file for international trademark protection. More information is available here

And why is it so important to protect ones business intangibles?

Intellectual Property protection is a critical part of small business success and its current or future growth. According to the U.S. Patent and Trademark Office’s stopfakes.gov web site, companies that protect their intellectual property drive more economic growth in the U.S. than any other single sector. In general, IP rights reward creativity, that fuels progress, innovation, spurs economical growth and creates jobs in return.

There are many different resources, to help you gather information on where and how to protect your intellectual property, sba.gov or export.gov are a good start.

We have also a unique opportunity for you to learn more about it during our free webinar on September 21st, which will be led by expert in the IP field, Partner at Holland & Knight law firm, Thomas W. Brooke. Registration is free and open.

Overtime Rule is Over The Top

Posted on by
Reply

By John Stanford, WIPP Government RelationsOvertime pic

The Department of Labor, it would appear, is working overtime. Two weeks ago, WIPP responded to the agency’s proposal to require labor history for federal contractors. Now, WIPP is addressing a different proposed regulation – this one making changes to overtime pay. Both proposals were well intentioned, and both pose risks to women entrepreneurs.

Disclaimer: this blog is a brief summary, so if your business may be affected I encourage you to read WIPP’s comment in its entirety.

It all began last spring, when President Obama directed the Labor Department to update overtime regulations, saying the standards for some employees had “not kept up with the modern economy.” Specifically, the so-called white-collar exemption was out of date. The exemption allows employers to avoid paying overtime (required anytime an employee works more than 40 hours a week) for executive, administrative, and professional employees because they typically have better pay, benefits, and privileges.

The exemption has three criteria. First, the employee must be salaried. Second, the salary must be above a certain threshold. Third, the employee duties must meet certain criteria – basically, you cannot just give someone a manager’s title and exempt them; they must be acting as a manager.

To answer the President’s call for modernization, the Labor Department proposed to update the second piece, the salary threshold, from roughly $24,000 to $50,440 and index it to economic growth. Essentially, this qualifies white-collar employees who make less than $50,000 a year for overtime pay if they work more than forty hours a week.

WIPP agrees with the President that our regulations do not match a 21st century economy, and we should work on updating these requirements for a fair and modern workplace. Moreover, companies that are purposefully skirting the rules on overtime pay and cheating otherwise qualified employees should be held accountable.

Nonetheless, simply doubling the salary threshold goes too far and achieves too little. While large companies in large cities may be able to afford a $50,000 salary floor, the entrepreneurial community is left with bad options: possibly cut employees to afford a minimum salary for others, or restrict working hours and set up an hourly tracking system. Notably, the Labor Department estimated only a quarter of employees will likely see higher paychecks. Others may see reduced hours.

In the comment, WIPP highlighted concerns about the cost to implement the rule, difficulties in application of the rule, and the dangerous impact on employee wages and benefits.

The Labor Department predicted that simply implementing this change would cost small businesses, including the vast majority of the nearly ten million women-owned firms, between $130-$180 million in the first year alone. That does not include the more than $500 million in increased wages small businesses are expected to pay. The Labor Department itself mentions that business could cut hours and benefits to make up for this loss.

Moreover, to ensure compliance with these new regulations, businesses will begin closely monitoring and tracking their employees’ work hours. Tracking and monitoring employee hours is very difficult, if not impossible, given the evolving dynamics of the workforce. Many white collar employees have flexible schedules, work from home, check and answer emails from smartphones or tablets and are no longer restricted by a rigid 9-5 schedule.

It also isn’t just companies. Non-profits face the same requirements. An exception for them (as well as small businesses) is so narrowly crafted it may not cover many mission-oriented organizations or the smallest of businesses. Both are places where working above and beyond forty hours a week may be more about commitment to a cause than a bigger paycheck. For this reason, WIPP asked that the exception be broadened to actually apply to small businesses and non-profits.

The idea that our regulations need to be updated is not political – it’s common sense. But often the regulatory pendulum swings too far as it has here. As proposed, women entrepreneurs could face the arduous tasks of transitioning current employees from salaried to hourly workers and possibly cutting benefits to make payroll all while tracking and limiting employee hours. Talk about working overtime.

What is Spectrum and Why it Matters to Your Business?

Posted on by
Reply

 

How much do you use mobile technology in your business?  Smartphones, tablets, wireless internet…if you use any or all of these then spectrum will matter to you.

Learn more from this video from CTIA – the Wireless Association.

More information can be found at myWireless.org:

Internet Regulation Hurts Instead of Helps

Posted on by
Reply

by Barbara Kasoff, WIPP President

EarlieInternetr this year, the FCC voted to adopt overbearing “Title II” regulations that have already led to legal battles which will likely extend for the next several years.  What is Title II?  Title II of the Communications Act of 1934 would grant the FCC additional regulatory authority; this is the authority they utilize over telecommunications services currently. Plenty of experts and economists, as well as the small business community, warned  against the consequences of applying outdated Title II regulations on our country’s Internet infrastructure.  For small telecom providers especially, it’s quickly becoming clear that Title II is detrimental to growth and investment in their businesses.

According to U.S. Census Bureau data, small businesses are the overwhelming majority in the telecommunications sector.  And in his dissent, FCC Commissioner Ajit Pai pointed out that “today there are thousands of smaller Internet service providers…that don’t have the means or the margins to withstand a regulatory onslaught. Smaller, rural competitors will be disproportionately affected, and the FCC’s decision will diminish competition.”

The FCC’s new regulations would subject those small businesses to uncertainty and costs, slowing innovation and leading to decreased investment.  A new policy memo from the Progressive Policy Institute highlights the investment issue, stating the FCC’s decision to adopt Title II regulations could undermine the FCC’s broadband adoption and expansion goals, as well as cost the economy billions in lost investment—a reduction in annual investment of $4 to $10 billion.

These damaging effects are not mere speculation: As of last week, many of these small broadband operators have gone on record, stating under penalty of perjury that these regulations are forcing them to cut back on investments.  These Internet providers include wireless Internet service providers, small-town cable operators, and others, from all across the country.  These different businesses are united, because they have been directly affected by regulations.  As a result, they are forced to cut back on network upgrades, expansion plans, capacity upgrades, and investment in rural and underserved areas.

For consumers, these cutbacks in investment will cause slower speeds, service delays, and coverage gaps.  Reduced investment means that expansion plans will be scrapped or at least delayed, especially in rural and underserved communities where increased broadband deployment is critical.  Consumers have been clear in their desire for faster speeds, expanded coverage, lower prices, and increased competition—but Title II regulations will result in the opposite, hurting small businesses along the way.

There’s a way out of this mess, one that doesn’t involve legal limbo: bipartisan legislation.  Congress can design bipartisan solutions that will protect the Open Internet and consumers, as well as provide light-touch regulation that prohibits blocking and throttling.  This approach will pave the way for increased investment, innovation, and competition—benefitting American consumers and relieving small businesses and entrepreneurs from an overwhelming regulatory burden.  These legislative efforts are currently underway, and we certainly look forward to a real solution, one that does not harm small businesses or consumers.