Paul Martin's Business Update - January 7th

Paul Martin's Business Update - January 7th

Rapid development of new forms of things such as social media on the internet have also brought about novel ways of raising money for businesses.

One is called crowdfunding where a business – usually a start up with a new idea – attracts small investors through the equivalent of a social media blitz, something that found an audience with young people. But anytime money is raised to underwrite a business, Securities Commissions get involved.

Social interaction on-line is a fact of life and rather than fight it, securities watchdogs have begun to join it. Saskatchewan, for example, has issued some crowdfunding rules, limiting investment to $1000 a pop or restricting the number of times a company can go to the well but the Web is not provincial so this is still a work in progress.

The pitfalls for those raising the capital include visibility. Quiet failure really isn’t an option. Or, if you do raise money, there’s the accounting. In some cases it might be considered income and unlike traditional capital would be taxable.

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