State firms up crowdfunding rules for businesses

Back to TopCommentsE-mailPrintBookmark and Share

Indiana firms can use the Internet to raise up to $2 million in a single securities offering, and Hoosiers can invest up to $5,000 each online, according to rules the Indiana Secretary of State's office announced Tuesday.

The rules apply to a law the Indiana Legislature passed earlier this year that opened the door to businesses raising investments via the Internet—a process loosely known as "crowdfunding." The state passed the law to mirror similar legislation on the federal level.

Crowdfunding began as an online fundraising strategy to collect donations for not-for-profit, artistic and humanitarian projects. Indiana's new rules allow small businesses and entrepreneurs, for example, to sell equity stakes to investors online.

“It can be used in conjunction with other traditional financing options, but by using multiple investors, crowdfunding will allow the entrepreneur to stay in control of the vision and direction of the business,” Indiana Secretary of State Connie Lawson said Tuesday during a press conference at The Speak Easy, a co-working space for startups south of Broad Ripple.

“And it’s intended to be one more tool to help Indiana companies stay off the ground and be productive,” Lawson said.

State law previously barred companies from selling equity stakes or other securities online, unless it was done through a professional brokerage.

“It can be anything,” said Indiana Securities Commission Commissioner Carol Mihalik. "It can be an ice cream shop, a brewery. [If] I want to raise capital via non-traditional sources—my bank has only given me 'X' dollars and I need more—I may be able to use crowdfunding as way to get additional financing or my only financing."

Under the rules developed by the Secretary of State, only Indiana businesses may register to crowdfund investments, and only Indiana residents can invest.

Indiana’s rules apply to any type of securities sold online. Online investing sites in Indiana no longer need to be certified brokerages as long as they file with the state. Unlike brokerages, however, they cannot collect commissions on security sales—only flat fees. The website hosts also must maintain all records for five years.

The law also lifts requirements that companies could only raise money from accredited investors who met certain income thresholds set by the U.S. Securities and Exchange Commission.

Lawson and Mihalik noted that companies will still need to meet many disclosure requirements.

All businesses need to provide a business plan and escrow agreement when they register to crowdfund their securities. And crowdfunding sites also must prominently note that private equity investments are high-risk and often illiquid.

“It’s full disclosure, like it has been in the past,” Mihalik said. “And so businesses need to be very careful to be sure the information they give is accurate.

“The best way to say it is: You say what you do and you do what you say. You can’t leave anything out that would let someone be uninformed about what the risk might be."



  • penalty
    what is the penalty for a CEO raising funds with misleading or absent critical information?
  • A good development...
    This is another tool that young entrepreneurs to utilize in order to raise capital for projects that avoids borrowing money from banks and large fees from brokerages. I hope that the state will provide a list of reputable securities dealers / sellers.
  • Lot's of Effort for Little Return
    At $5,000 maximum per investor per deal, the cap tables for some of these companies will be enormous. And the management of those larger numbers of investors will be rather burdensome for the entrepreneurs. The lower maximum makes sense, though, in order to provide a degree of protection for investors from potential crowdfunding scams.

Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. I had read earlier this spring that Noodles & Co was going to open in the Fishers Marketplace (which is SR 37 and 131st St, not 141st St, just FYI). Any word on that? Also, do you happen to know what is being built in Carmel at Pennsylvania and Old Meridian? May just be an office building but I'm not sure.

  2. I'm sorry, but you are flat out wrong. There are few tracks in the world with the history of IMS and probably NO OTHER as widely known and recognized. I don't care what you think about the stat of Indy Car racing, these are pretty hard things to dispute.

  3. Also wondering if there is an update on the Brockway Pub-Danny Boy restaurant/taproom that was planned for the village as well?

  4. Why does the majority get to trample on the rights of the minority? You do realize that banning gay marriage does not rid the world of gay people, right? They are still going to be around and they are still going to continue to exist. The best way to get it all out of the spotlight? LEGALIZE IT! If gay marriage is legal, they will get to stop trying to push for it and you will get to stop seeing it all over the news. Why do Christians get to decide what is moral?? Why do you get to push your religion on others? How would legalizing gay marriage expose their lifestyle to your children? By the way, their lifestyle is going to continue whether gay marriage is legalized or not. It's been legal in Canada for quite a while now and they seem to be doing just fine. What about actual rules handed down by God? What about not working on Sundays? What about obeying your parents? What about adultery? These are in the 10 Commandments, the most important of God's rules. Yet they are all perfectly legal. What about divorce? Only God is allowed to dissolve a marriage so why don't you work hard to get divorce banned? Why do you get to pick and choose the parts of the Bible you care about?

  5. Look at the bright side. With the new Lowe's call center, that means 1000 jobs at $10 bucks an hour. IMS has to be drooling over all that disposable income. If those employees can save all their extra money after bills, in five years they can go to the race LIVE. Can you say attendance boost?