New Rule Regarding Solicitation of Investors

Yesterday the Nevada Secretary of State posted a media release regarding new regulations that went into effect regarding public solicitations for investors. The article warns that it could open the floodgate to a wave of securities fraud and that investors should educate themselves of the new rule- Regulation D Rule 506(c) of the Securities Act.

In April 2012 Congress passed the Jumpstart Our Business Startups (JOBS) Act, which changed the way that this rule allows offerings to be sold. According to the article private placement offerings of securities, such as stocks, bonds and other instruments are exempt from SEC registration requirements. Furthermore the state of Nevada does not review them for verification of information or level of risk.

Additionally it states that under this new rule companies are allowed to publicly solicit investors and advertise the sale of securities without registering the offering with either the SEC or any state if certain requirements are met. These investments may be sold via television commercials, newspaper ads, internet sales and cold calls.

“This rule change provides a new solicitation platform that is another avenue for swindlers to scam investors, so I urge investors to perform due diligence and thoroughly check the offerings before investing,” said Secretary Miller.

Previously such offerings were only made known through investment professionals or word of mouth. As a precaution to protect investors from fraud, they should fully understand the following:

• These offerings often involve companies with a limited history.
• There may not have been a regulatory background check of the sellers, managers or officers of the company issuing the investment.
• They often promise higher rates of return- and come with higher risk.
• These securities are generally illiquid, which means you may have a limited ability to get out of the investment and may hold it indefinitely.
• You may be offered less information than a public offering.
• No regulator has confirmed that the risk disclosure or information about the company is adequate.

Regulation D Rule 506 investments, if sold via advertisements or general solicitation, may only be sold to accredited investors. An accredited investor is:

• A natural person must have a net worth , exclusive of your primary residence, of more than $1 million, or
• Have had an income over $200,000 individually, or $300,000 with your spouse, in each of the last tow years, and expect to earn the same amount this year.

For a complete summary of the proposed regulations that went into effect 9/23/13 go to http://www.sec.gov/rules/proposed/2013/33-9416.pdf.

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Benefit Corporations

In May Nevada Governor Brian Sandoval signed a bill allowing companies to organize as a “Benefit Corporation”. The new law, which goes into effect January 1, 2014, also establishes a process whereby existing companies may restructure as one.

What is a Benefit Corporation?

It is a new class of corporation that is required to create a material positive impact on society and the environment while maintaining a higher level of accountability and transparency.

Unlike a traditional Corporation, they are allowed to consider obligations that have a social or environmental impact alongside profit. However, they are granted immunity from civil lawsuits for not putting profit first.

They are designed to harness the power of private enterprise for public benefit, provide greater transparency and greater protection. The tax requirements are still the same as with traditional corporations.

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The JOBS Act- a new crowdfunding craze

President Obama recently signed The JOBS Act , which purportedly will ease access to money for small businesses. The Jumpstart Our Business Startups Act bill is supposed to help entrepreneurs find investors through online “crowdfunding,” allowing all Americans to invest in new companies.

This bill also aims to reduce the red tape involved in publicly selling stock. The clock has begun ticking for the SEC to draft regulation to protect investors.

Reports indicate that the JOBS Act allows companies to raise up to $1 million a year from individual investors. The regulations are said to include protection for people who have an annual income or net worth under $100,000 wherein they can invest no more than $2,000 in a company that's using crowdfunding.

An important consideration in using crowdfunding is that companies can find themselves having to answer to many shareholders that they have never met. They may then find themselves having to publicly reveal financial information and statements.

The good news is that small companies that don't have a lot of close connections will now have another avenue to find investors.

Before you engage in crowdfunding thoroughly check out any intermediary broker or funding portal. You should make sure that the broker is registered with the SEC, for example. There will likely be a host of new funding portals popping up, some of which may or may not be reputable. Be sure to do your due diligence.

You should also consult with your attorney and tax advisor regarding legal and tax issues regarding your investors so that you know what to expect.

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Nevada is first to allow testing of self-driving vehicles on roadways

This is an interesting article about some new testing that is taking place in Nevada. It will be intriguing to see what they do with these self-driving vehicles.

Nevada is first to allow testing of self-driving vehicles on roadways


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Gov. Brian Sandoval On Nevada's Economic Plan

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Just How Risky Is Entrepreneurship, Really? - Bruce Gibney and Ken Howery - Harvard Business Review

Just How Risky Is Entrepreneurship, Really? - Bruce Gibney and Ken Howery - Harvard Business Review

There are two views on entrepreneurship in America: the first (largely feigned), that it is a pure virtue like freedom of speech or religion, and the second (real) attitude that it is largely a game for the naïve. Steve Jobs, Mark Zuckerberg, and Michael Dell make fine fodder for commencement speeches, but when parents and career counselors thrust graduates into the job market, the default isn't entrepreneurship, it's corporate serfdom. Entrepreneurship is a deviation, an occupation for heroes, heroic for the reasons it can't be recommended: it's just too unsafe. But the conventional position is nonsense; building new companies is far more sensible than the practical will admit.

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Economic Indicators from Nevada Secretary of State's Office Show New Entity Filings Up Significantly in First Quarter

(Carson City, NV; May 11, 2011) – With mixed reports about the strength of the economic recovery in Nevada coming from a variety of sources, the latest statistics sourced to the Nevada Secretary of  State’s office show two consecutive quarters of significant growth in new business entity filings, suggesting new investments may be leading to business expansion. (See the full report here.)

As reported in the Quarterly Economic & Business Activity Report prepared by Applied Analysis, a Nevada-based research and analysis firm, new entity filings were up 12% in the first quarter of 2011 compared to the same period in 2010. The latest quarterly growth followed the preceding quarter’s positive performance, which was the first since mid-2006.

“I’m as optimistic as I’ve ever been that Nevada has broken through the restraints of the worst recession in decades and is now moving steadily toward economic recovery,” Secretary of State Ross Miller said after reviewing the analysis. “Nevada has a history of incredible resilience, and I’m confident that history will repeat itself. While I don’t think anyone expects to quickly rebound to record-breaking growth, I believe the latest numbers from my office  indicate that more people will find work in the coming months and that we all can look forward to greater economic stability.”

Read Full Article here
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Small Businesses Skip the Health-Care Tax Credit

Insurance brokers say response is low because the value of the benefit declines quickly for companies that pay average annual wages of more than $25,000 or employ more than 25 workers.

By David Lerman and Liz Smith

Sales are off by 20 percent this year at Image Computer, which repairs printers in suburban Detroit. So President Steve Olis is worried about whether he can continue paying the $71,000 a year it costs him to provide health insurance for his employees.

The Obama Administration's answer for Olis and other small-business owners: a tax credit of as much as 35 percent of the insurance premiums they pay for employee medical coverage, a signature part of the health-care reform bill signed into law in March. Image Computer, however, doesn't qualify for the credit because Olis pays his 15 employees an average of $55,600 annually, and companies with average salaries above $50,000 aren't eligible. "At some point I can't do this any longer," Olis says of his rising health-care premiums.

Eager to promote the new small-business tax credit, the government this spring mailed 4 million eligible companies postcards with highlights of the program. The response has been tepid, according to insurance brokers who sell small-group policies. The reason, they argue, is that the credit starts to phase out for companies that pay average annual wages of more than $25,000 or employ more than 25 workers. The value of the benefit declines quickly, so many business owners in high-cost states get no tax break, and those elsewhere often say the credit is too small to make much of a difference. Sales of health plans have gotten "very little traction so far," says James Stenger, director of business development for BenefitMall, which sells small-group plans in New Jersey.

Stenger says most of his clients pay their workers more than $25,000 a year, so the average tax credit he's seeing for the few who qualify is about 10 percent of the cost of the policy. That's less than $200 per worker—not enough to spur many business owners to start providing coverage. Brokers across the country report a similar response. JLBG Health in Warrenville, Ill., contacted 460 small businesses about the tax credit. Roughly 40 percent were eligible, though only seven of those companies qualified for the full benefit. Not one of the 400 New England employers served by Hampstead (N.H.)-based Landmark Benefits is eligible, the broker says. The legislation "is just not doing what we had hoped," says Steven Selinsky, the incoming president of the National Association of Health Underwriters.

U.S. Small Business Administration chief Karen Mills says complaints about the tax credit are premature. "This is all still in anecdote land," Mills said in an interview. She maintains that the income cap was needed to keep a lid on the cost of the tax credit and that the people with the greatest need—low-paid workers at the smallest companies—will be able to get coverage. Companies "want to provide health insurance [because] they're losing good employees when they don't," Mills says. "The math says [the program] is likely to be positive."

One company that has had success selling policies under the program is Blue Cross and Blue Shield of Kansas City, which launched a marketing push to promote the tax credit when the law was enacted. Although less than a quarter of small businesses in the Kansas City area qualify for the credit, the ad campaign paid off. Blue Cross has sold 227 plans to small businesses in the past three months—80 percent more than in a typical three-month period, says Tom Bowser, chief executive officer. Now, Blue Cross affiliates in other states are hoping to replicate the Kansas City marketing strategy—a combination of print ads, radio spots, and direct mail explaining the program's advantages. The success "is tangible evidence that this legislation is having some effect," Bowser says, "and we're cashing in on it."

The bottom line: Many small businesses can't take advantage of a tax credit designed to reduce the cost of providing health insurance.

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Still Upbeat About the Recovery - from "You're the Boss - The art of running a small business"

I know I raised some eyebrows a few months ago when I wrote that the economy was turning around (“Here Comes the Recovery!“). While lots of folks commented that they, too, were experiencing a resurgence in their business over the past few quarters, there seemed to be just as many naysayers who saw only dark clouds ahead. With the recent news that gross domestic product grew at a less-than-expected 2.4 percent in the second quarter (down from a revised 3.7 percent in the first quarter), the naysayers (including economists) who are predicting a double-dip recession are getting louder than ever.


I can tell you that I remain bullish on the recovery, especially as it applies to our company, SRC Holdings. For example, Guildmaster, our home furnishings division, closed out a record-setting July, which is historically the industry’s toughest month for sales. Last year, the company lost $110,000 for the month. This July, it turned a profit for the month for the first time in company history. And given the response it received at the recent industry trade show in Atlanta, we expect those results to continue for the rest of the year.

Sales are improving throughout every division of our business. Things are going so well, in fact, that we have been on something of a hiring spree to keep up with demand. Total United States employment at SRC is now 884 — up from 658 in July of last year. This gives me hope that other companies will begin hiring aggressively.

But, I have to admit how frustrated I am by all the contradictory news out there these days. It’s as if most people see the glass as half empty no matter what the evidence. Growth may have been slower than expected in the second quarter, but it was still growth. It sometimes seems as if we want to kill the recovery before it has a chance to gain momentum.

I wonder why we don’t focus more on all the good news out there these days. Take, for example, the news that second-quarter earnings at Caterpillar jumped 91 percent over the previous year while revenues were up 31 percent. After several years of painful job cuts, the manufacturer has begun to hire again.

Another example comes from the trucking industry, where Mark Pigott, the chairman and chief executive of Paccar, which manufactures trucks under brands like Peterbilt and Kenworth, recently outlined the good news he sees both for his company and the industry. In an earnings call with analysts, Mr. Pigott said that you can track the progress of the trucking industry by three measures: sales of parts and services, values of used trucks, and orders for new trucks. He said that through the first six months of the year, sales of parts and services are up 10 percent to 15 percent, prices for used trucks are up 10 percent, and orders for new trucks are up 30 percent.

These bits of good news were echoed by other positive earnings reports from lots of other companies, including Dupont and Microsoft. Yet, when you tune in to the news each day, you seem to find far more stories that focus on the potential downside. I feel like I’m always reading headlines like these:

“Can this earnings season keep up its winning streak?”

“Housing sales up, but still weak.”

“Chinese spending can’t save the economy.”

“Is there anything else Bernanke can do?”

Granted, hiring has yet to pick up steam and companies have been using their gains to shore up their balance sheets. But the fact that any company is still around let alone thriving after steering itself through all the storms of the past few years should be considered a positive thing. We should be celebrating these companies rather than dwelling on what they aren’t doing. It’s like we’re playing a game of Ping-Pong, where there is a constant back and forth between good and bad news. Rather than celebrate our victories, we seem to worry about our next loss.

I think part of the reason for the confusion is that there are more economic indicators than ever for people to follow. They seem to change on a daily or even hourly basis. One of the problems is that nobody seems to have faith in any of the numbers, which adds to the feeling that the glass is half empty.

But, when you talk to businesspeople — rather than just the academics, politicians or financiers — a different story starts to emerge. That’s what Timothy F. Geithner, the Treasury secretary, says he did before making his recent positive comments about the recovery. I saw Mario Gabelli, the investor, say on television that if you want to get the real story behind the economy, you should talk to leaders from businesses of all sizes, large and small. Too often, though, we read stories that ignore the folks with their boots on the ground.

The point is that we won’t be able to enjoy the fruits of a recovery until we begin to shift our vision, to stop looking back and worrying about how bad things were and begin looking forward and recognizing that things are turning around. Recoveries are fragile and we need to celebrate our victories to build on that momentum.

I’m interested in hearing from you. How do you see the world these days?

Jack Stack is the founder and chief executive of SRC Holdings in Springfield, Mo. SRC is a collection of 37 businesses and 1,200 employees who make, among other things, racecar engines and home furnishings.


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What to Do if You Are Attacked Online: Setting a Social Media Policy for Your Business

I have always been a big promoter of social media as a way to increase business. I’ve talked about it, read about it, and written more than I can tell you. But in all my years online, I had never personally been the brunt of the ugly side of social media. Until one day – I was.

Instead of a paper trail, there was a trail of online comments. There were IMs, text messages, e-mails, blog comments and even a website that all quickly led to some serious (but thankfully short-lived) issues.

Has it happened to you? Maybe a blogger you know writes something about you in a blog post that really stings. Or worse, someone you don’t know deliberately attacks you or your reputation in public–and permanently–through search engines. You may have been through something similar. No one is exempt-it happens to individuals, but it attacks small businesses too. And if you think it stings personally, imagine the blow it can deal to your small business.
That being said, I want to make this clear: A social media policy in your workplace should not shut down social media activity. To the contrary, I believe a policy should encourage activity. A policy should also protect your business and employees from getting into trouble with the law (issues like libel, defamation, leaking of confidential or damaging information, etc). It should inform employees what is acceptable and what is not, before an issue arises.
Things can blow up quickly when you least expect it.

Most people treat social media policies like long-term care insurance-they don’t think about it until they need it. By the time you need it, it’s either too expensive or too late. When something goes wrong online, it can catch you off-guard. If someone targets you or your business, it might start while you’re asleep. The next thing you know, it’s in the news headlines. And if you respond poorly, you have a fire you can’t put out (just ask Nestle).

Before you know it, the negative blog post or comment is one of the first things that comes up on Google. If you wait too long and a lot of people comment on the post, it can be very difficult to get the reference removed or displace it in search engines.
Inexperienced businesses may take situations too casually in the beginning. It’s better to address issues early on. Name the people at your company who should be informed, and plan who should respond. Make sure employees know the plan so they don’t address the attack individually. This is not a job to leave to your intern.

Decide what to do when you’re attacked online.

Let’s say someone writes something damaging about your business as a comment on your Facebook page or blog post. How would you respond? Don’t retaliate no matter how strong the urge.

Here are three possible responses:
Acknowledge the complaint, then transition to a statistic or how you are helping clients. Then offer to address the issue privately. This is the option I’d recommend for most cases – but it depends on the situation.

Delete the comment. If the comment is on your Facebook page, your blog or another site you moderate, you could delete the negative comment. If you have a policy, refer to it. Write something like, “This comment has been deleted because it violated [state reason].” I’ve deleted comments that were personal attacks on people mentioned in my post or for vulgar or explicit content. Sometimes I only delete part of the comment, always explaining why. Be careful though, as deleting comments can turn into a PR nightmare.

Ignore the negative comment, post or review. If the person is just being belligerent (it happens) and they aren’t going on a rampage, you can probably ignore it. This can backfire, though-giving the person reason to be even angrier and fight even harder to destroy your reputation–so keep an eye on the item.

Here is some helpful information from Fast Company about the social media policies of various companies.
Remind employees to be professional – this is all public.
It’s easy to type something without thinking of the implications. Time Warner Cable’s social media policy states: “On social networks where you identify yourself as an employee of TWC, be mindful that the content posted will be visible to coworkers, customers and partners. Make sure the information posted is the most professional reflection of your opinions and beliefs.”
I also liked this language from this article about libel online:
Twitter and Facebook have become a great way to sound off online. But remember that you have an audience.
Remember you always have the possibility of causing someone serious harm when you make those statements on the Web. Unless you know you’re fully protecting yourself, you should be careful what you say.
I appreciate that OrangeSoda not only allows but encourages employees to be active online. It helps the company to have people with their own networks who can send a tweet out. Sometimes we get asked to speak at conferences thanks to our social media activity. It will probably help your business too-just don’t forget there are also risks.
Bottom line: We need to have zero tolerance for cruelty online and a plan to address the downsides of social media. When you set up your policy, don’t discourage participation but do set clear boundaries for what’s acceptable and what’s not. Have a plan that you can implement quickly before an issue explodes and is harder to address.

ABOUT THE AUTHOR: Janet Meiners Thaeler is an Evangelist for OrangeSoda Inc. and the principal blogger for their corporate blog and Twitter account. She regularly advises clients on blogging and social media strategies. Her own blog is Newspapergrl.com (and Twitter account @newspapergrl). She is passionate about online marketing and is always looking for new insights, resources and trends to help her clients.

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