Study Shows Most Companies not Taking Full Advantage of the JOBS Act

The Jumpstart Our Business Startups (JOBS) Act is a bipartisan piece of legislation that was signed into law in April of 2012. The law, which had several co-sponsors from both political parties, was intended to encourage funding of emerging growth companies by easing certain securities regulations and making it easier for these companies to receive the funding they need during their critical startup stage. Contact BASC Expertise, your trusted Mesa accountant for specific details about the JOBS Act. Business Loan

The JOBS Act is credited with giving rise to a new phenomenon in the investment community known as “crowd investing.” Crowd investing is a close cousin of “crowd funding.” The difference is that crowd funding deals mainly with charities, non-profits and other non-financial return models while crowd investing deals with for-profit entities.

While crowd investing is what the JOBS Act is best known for, there are several other provisions in the bill that are designed to help startups. They include:

  • Emerging growth companies, defined as companies that have less than $1 billion of gross annual revenues and have been public for less than five years, are exempted from a number of key provisions of the Securities and Exchange Act of 1934.
  • Emerging growth companies are only required to provide two years of audited financial reports rather than the three years required of traditional publicly traded companies.
  • Emerging growth companies are allowed to utilize the SEC’s confidential submission process, which allows them to operate without a public initial registration statement.
  • Emerging growth companies are allowed to file registration statements with less detailed information than is normally required by the SEC.

A new study shows that many startups are choosing not to take advantage of some of the incentives offered by the JOBS Act. For example, only about half of companies responding to the survey elected to provide only two years of audited financial reports, opting instead to release three full years to the SEC. In addition, the vast majority of companies surveyed elected not to take advantage of the “phase in” rules for new or revised financial accounting standards.

Overall, the study indicates that for whatever reason, large numbers of U.S.-based emerging growth companies are bypassing some of the attractive provisions offered by the JOBS Act. Some companies may simply be unaware that these provisions exists, while others may be choosing to err on the side of caution when dealing with the SEC. Companies that are unsure whether or not they should take advantage of these incentives should consult a Mesa accounting firm that can advise them on how these incentives will impact their entity during the startup phase.

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