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New act may give a boost to small businesses

A business start-up can be a tough venture, especially in the current economic climate against existing laws that make it difficult for new companies to make money and grow. However, thanks to a bipartisan effort in Washington D.C., small business owners have been given a leg up in their efforts to raise money and grow their businesses.

Just recently, the United States senate passed what was called the Small Company Capital Formation Act, which will make it easier for small businesses to raise the capital they need to find growth and create new jobs. Current regulations put in place by the Securities Exchange Commission make it somewhat difficult for new and small businesses to raise money.

The current law limits a company's maximum shareholders to 500. If this is not enough, the company will be forced to go public, which can be incredibly taxing for a company. Companies that are publicly traded on the stock market need to install an investor relations department that keeps investors informed on happenings within the company via regular reports.

Instead of forcing companies to go public when they've reached their shareholder limit, the new bill extends that limit to 2,000 shareholders, giving business owners room to raise extra money to grow their companies while staying independent.

The act would also beef up an existing limit in the amount of shares a company can sell. Right now, the limit is set at $5 million worth of shares before it will be forced to go public. The Small Company Capital Formation act raises this amount to $50 million.

Opponents of the bill said that it certainly helps give companies the means to raise extra money, but does not adequately protect investors and opens the door for potential fraud.

The Small Company Capital Formation Act is a portion of the Jumpstart Our Business Startups Act adopted by the federal government to help build small businesses, which are often said to be the backbone of America.

Source: KFBB-TV Channel 5, "Small Company Capital Formation Act passes U.S. Senate," Charlie Keegan, March 23, 2012

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