Business Law Assignment: Crowdfunding

This report examines crowdfunding, a method for entrepreneurs to raise capital from numerous individuals, primarily online. It details the process, including different funding models (lending, reward-based, donation-based, equity-based), and provides examples of successful crowdfunding platforms like Indiegogo and Kickstarter. The report focuses on the legal regulations surrounding crowdfunding in Australia and the United States, contrasting the stricter Australian approach with the more lenient US regulations under the JOBS Act of 2012. The analysis highlights the challenges and opportunities presented by Australian crowdfunding regulations, suggesting a need for less restrictive policies to foster entrepreneurial growth and economic development. The report concludes by emphasizing the potential benefits of crowdfunding for small businesses and the importance of clear, effective regulations to support this innovative funding method.

RUNNING HEAD: BUSINESS LAW ASSIGNMENT 1

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Contents
Introduction......................................................................................................................................3
Process of Crowd funding...............................................................................................................4
Example of Social and Social Crowd Funding................................................................................5
Crowd funding regulations..............................................................................................................6
Observation......................................................................................................................................7
Conclusion.......................................................................................................................................9
Bibliographies................................................................................................................................10

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Introduction
Crowd funding is a process through which finances are created by large number of people. This
method is used by the Entrepreneurs who are unable to source from the traditional sources. This
technique helps in connecting the small financers through internet1. These small financers
include family members, friends and relatives who are looking for investment. The concept of
Crowd funding is new to Australia. The Common Wealth Government has made new regulations
1 Bruton, Garry, et al. "New financial alternatives in seeding entrepreneurship: Microfinance,
crowdfunding, and peer‐to‐peer innovations." Entrepreneurship Theory and Practice 39.1
(2015): 9-26.

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for the small Entrepreneurs2. Crowd funding has gained popularity among the small
entrepreneurs due to the upcoming tradition of start-ups. The report provides different procedure
of crowd funding and evaluate different opportunities available in the market. There are different
relevant theories associated with the concept of crowd funding. Lastly the report will focus on
the legal Regulations in USA regarding crowd funding.
Process of Crowd funding
In the modern economy, people do have a direct access to internet to meet their requirements.
The change in society has allowed in building the concept of crowd funding. In the recent time,
there is an increase in the number of entrepreneurs. An increasing number of entrepreneurs are
creating a need for more investment. The traditional investors tend to support large entrepreneur
decreasing the scope for the small entrepreneurs3. This is the reason, crowd funding has gained
popularity in most of the nations in crowd funding, and a large number of buyers are making an
investment in small portions. This helps in raising the fund in order to start the venture. Funds
can be raised through 4 different methods selected by the entrepreneur on the basis of the project.
In case of Inlending-based crowd funding, the fund provided by the financers is called as debt.
The entrepreneur has to pay off the debts and interest. The reward base method is based on
providing the incentives to the financers. This method helps in attracting people for funding a
project. Donation based funding is used by the NGO’s for raising fund due to some charitable
cause. The equity based crowd funding method is used by small sized companies in which shares
are allotted to the investors. The reward based method is used by the financers to attract funds
from different financiers.
There is a necessity to follow an appropriate technique to raise fund from the crowd funding
method. These guidelines are mandatory for following the crowd funding process4. It is
important to provide with the mandatory guidelines to the potential investors and the
2 Pentony, Graw, Lennard & Parker, Understanding Business Law 3rd ed Butterworths, 2009
3 Crosling G M, Murphy H M, How to Study Business Law 4th Edition, Butterworths, 2009.
4 Lipton P, Herzberg A and Welsh, M, Understanding Company Law, 18th edition 2016
Thomson Reuters.

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entrepreneurs. The information brochure includes every bit of information about the venture.
The project include price of the project, specification and time frame in which fund can be
recovered. The information has to be collected from the available accessible offers available for
crowd funding5.
Example of Social and Social Crowd Funding
In reality, there are various entrepreneurs who uses crowd funding to fund the project. There are
several online portals providing with crowd funding solutions. The examples of such crowd
funding project are Indigogo, Kickstarter, GoFundMe, and MyCause. The purpose of these
websites is to provide with funding facilities in Australia. The purpose of these websites is to
generate fund for the small entrepreneurs finding difficulty in raising funds. These websites help
in raising funds for the small entrepreneurs6. Pebble Time is known as a successful crowd
finding project attracting people across the world with their smart watches technology. The
crowd funding page of the company has raised a sum of $ 20 million through their 80 thousand
investors. Kickstarter is another example of online crowd sourcing portal raising funds for the
entrepreneur. They have provided fund to 22 million entrepreneurs by raising a fund of $ 500
million in 20147. The online services help in fostering investment which in return helps in
economic development. The purpose is to meet the target by following the process of crowd
funding. Flow Hive is an Australian corporation harvesting honey through different ways.
These campaigns are important for the growing business organizations. This process is
important for generating fund. The popularity of crowd funding has generated a wide scope.
5 Harris, J. Hargovan, A. Adams, M. Australian Corporate Law LexisNexis Butterworths 5th
edition, 2015.
6 Eastwell, Michelle, Jessica Dale, and Felicity Dunstone. "Crowd-sourced equity funding is
coming to Australia." Governance Directions 69.7 (2017): 411.
7 Frydrych, Denis, et al. "Exploring entrepreneurial legitimacy in reward-based crowdfunding."
Venture Capital 16.3 (2014): 247-269.

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Apart from commercial companies, there are social organizations that generate funds from the
process of Crowd sourcing. MyCause is a fund raising website collecting fund for the social
cause. The money raised by this website is used to help those in need. People are gaining
awareness through these websites.
Crowd funding regulations
As per the recent law and regulations, the process of outsourcing is important enough to meet the
requirements of crowdsourcing. There are majority of countries that help in enhancing the
process of crowd funding. Australia has implemented provision regarding the process of crowd
funding. The Corporations Amendment Act 2017 is enacted to look after the regulation for
protection from fraud8.
The Act provides several provision of Corporation Act 2001 in order to provide different
exemptions in order to use crowd funding method. There are regulations Australian Securities
and Investments Commission Act 2001 do have amended the changes taking place in the market.
This act basically limit from investing more than ten thousand dollars over crowd funding
annually. There are wholesale investors not restricted from making investment in crowd
funding project. The amount of investment is limited by law. The assets capitalization below $ 5
million can raise investment by the process of crowd funding9.
USA and UK doesn’t have restrictions regarding the crowd funding project. The Job Act 2012
provides with the regulations pertaining to the process of crowd funding. The financers do have
an authority to spend as per the financial status. Crowd funding is a common process in all over
USA10. The regulation crowd funding in USA is managed y the Security Exchange Commission.
8 Hui, Julie S., Michael D. Greenberg, and Elizabeth M. Gerber."Understanding the role of
community in crowdfunding work." Proceedings of the 17th ACM conference on Computer
supported cooperative work & social computing. ACM, 2014.
9 Graw, Parker, Whitford, Sangkuhl and Do, Understanding Business Law 7th ed LexisNexis
Butterworths, 2015.
10 Weinstein, Ross S. "Crowdfunding in the US and Abroad: What to Expect When You're
Expecting." Cornell Int'l LJ 46 (2013): 427.

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The Australian law restricts people from generating large funds through the process of crowd
funding. The crowd funding campaigns are able to reach out to a limited market segment. This
reason actually restricts the crowd funding process. A limited access to the crowd funding is
creating problem in growth. There is a problem in generating fund due to restricted availability
of crowd sourcing process. An increasing number of entrepreneurs are creating a need for more
investment. The traditional investors tend to support large entrepreneurs decreasing the scope for
the small entrepreneurs11.
Observation
In the recent time, the process of crowd funding has gained recognition among the small scale
entrepreneur and business corporation. This is a modern method that allow in raising fund from
small entrepreneurs. A majority number of countries have implemented an effective crowd
funding plan to gain consideration. Australia has implemented the law in order to manage the
business functions in an appropriate way. There are many experts who are criticizing the policies
established by The AUSTRALIAN Government regarding the process of Crowd funding. There
is a need of a proper rules and regulations governing the process of crowd funding. The most
effective part of this concept is regarding the process of crowd funding due to the restricted
government regulations. It is necessary to liberate the rules and regulations. This process is
effective enough to manage the consequences attached with the process of crowd funding.
As per the given circumstances, the regulations regarding Crowd funding in Australia is strict.
UNITED States, rules and regulations regarding crowd funding is lenient, there are maximum
number of people who are generating funds through the process of Crowd funding in USA.
Small sized entrepreneurs are benefitted by the process of crowd funding. This process is
important for the development of the economy and growth. This creates better employment
opportunities reducing the burden on economy. This process has supported many businessmen
in raising funds. Small sized organizations are benefitted by the process of crowd funding.
Kickstarter is a US based crowd funding organization providing funds to people. The company
provides fund to the people through their online portal. The 3Doodler is a 3D printing pen that
11 Stumm, Tony. "The rebirth of crowd funding in Australia!." Governance Directions 69.2
(2017): 96.

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lets anyone draw in 3D. With $2,344,134 it raised in 34 days, over 26,000. Kickstarter backers
earned the rewards within a year after the fundraise ended12.
With so many changes in the market, it is important to implement an effective crowd funding
policies. These policies help in raising funds from the investors across the world. Australia needs
to reduce the legal restriction on the process of crowd funding. It is important to provide with the
mandatory guidelines to the potential investors and the entrepreneurs. The information brochure
includes every bit of information about the venture. In order to gain future advantage, it is
important to implement an effective crowdsourcing regulation. These regulations will help in
developing the process of crowd funding in Australia. The provisions in Australia are in
accuracy with the organizational structure helping in gaining long term sustainable resources.
The traditional investors tend to support large entrepreneurs decreasing the scope for the small
entrepreneurs. This is the reason, crowd funding has gained popularity in most of the nations. In
crowd funding, a large number of buyers are making an investment in small portions. While
making a decision regarding the decision making it is evident to develop an effective policies
helping in gaining a competitive advantage13.
Over the past few years, there is an increase in the number of start up’s across the world. In this
scenario it is suggested to Howard Jones to increase the life of the batteries. This will gradually
help in putting the things at the right place. It is possible to collect fund from the crowd funding
method. This method will help in generating fund. The company will help in generating better
opportunities for the business organization. The information brochure includes every bit of
information about the venture. The project include price of the project, specification and time
frame in which fund can be recovered. Crowd funding is a process that help in managing a
venture. In this way, it is possible to manage the organization in an effective way. The Common
12 Stanko, Michael A., and David H. Henard. "How crowdfunding influences innovation." MIT
Sloan Management Review 57.3 (2016): 15.
13 Harris, J. Hargovan, A. Adams, M. Australian Corporate Law LexisNexis Butterworths 5th
edition, 2015

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Wealth Government has made new regulations for the small Entrepreneurs. Crowd funding has
gained popularity among the small entrepreneurs due to the upcoming tradition of start-ups14.
Conclusion
It is clear that the crowd funding helps in generating fund for the small size entrepreneurs the
process helps in ensuring that the organization is getting support. The online services help in
fostering investment which in return helps in economic development. The purpose is to meet the
target by following the process of crowd funding. People who are interested in the process can
make an investment in order to gain competitiveness. The crowd funding process is important
from the point of view of economic development. Howards Jones can select the method of crowd
funding in order to start business. This will help in managing the business related expenses in a
better way. The method of crowd funding is comparatively better than rest of the traditional
technique. The online websites is providing with the better options. There are majority of
countries that help in enhancing the process of crowd funding. Australia has implemented
provision regarding the process of crowd funding. In order to manage funds, it is evident to find
out the appropriate way to raise the funds. There is a problem in generating fund due to restricted
availability of crowd sourcing process. An increasing number of entrepreneurs are creating a
need for more investment.
14 Manzoor, Amir. "Crowdfunding for Non-Profits." Handbook of Research on Emerging
Business Models and Managerial Strategies in the NonprofitSector(2017): 152.

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Bibliographies
A. Books/Article/Journals
Bruton, Garry, et al. "New financial alternatives in seeding entrepreneurship: Microfinance,
crowdfunding, and peer‐to‐peer innovations." Entrepreneurship Theory and Practice 39.1
(2015): 9-26.
Crosling G M, Murphy H M, How to Study Business Law 4th Edition, Butterworths, 2009.
Eastwell, Michelle, Jessica Dale, and Felicity Dunstone. "Crowd-sourced equity funding is
coming to Australia." Governance Directions 69.7 (2017): 411.
Eastwell, Michelle, Jessica Dale, and Felicity Dunstone. "Crowd-sourced equity funding is
coming to Australia." Governance Directions 69.7 (2017): 411.
Frydrych, Denis, et al. "Exploring entrepreneurial legitimacy in reward-based crowdfunding."
Venture Capital 16.3 (2014): 247-269.
Graw, Parker, Whitford, Sangkuhl and Do, Understanding Business Law 7th ed LexisNexis
Butterworths, 2015
Harris, J. Hargovan, A. Adams, M. Australian Corporate Law LexisNexis Butterworths 5th
edition, 2015
Hui, Julie S., Michael D. Greenberg, and Elizabeth M. Gerber."Understanding the role of
community in crowdfunding work." Proceedings of the 17th ACM conference on Computer
supported cooperative work & social computing. ACM, 2014.
Pentony, Graw, Lennard & Parker, Understanding Business Law 3rd ed Butterworths, 2009.
Stanko, Michael A., and David H. Henard. "How crowdfunding influences innovation." MIT
Sloan Management Review 57.3 (2016): 15.
Stumm, Tony. "The rebirth of crowd funding in Australia!." Governance Directions 69.2 (2017):
96.
Vermeesch, R B, Lindgren, K E, Business Law of Australia Butterworths, 11th Edition, 2005.

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Weinstein, Ross S. "Crowdfunding in the US and Abroad: What to Expect When You're
Expecting." Cornell Int'l LJ 46 (2013): 427.