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Calculating net worth involves adding up all your assets and subtracting all your liabilities. The resulting sum is your net worth.
For purposes of crowdfunding, the value of your primary residence is not included in your net worth calculation. In addition, any mortgage or other loan on your home does not count as a liability up to the fair market value of your home. If the loan is for more than the fair market value of your home (i.e., if your mortgage is underwater), then the loan amount that is over the fair market value counts as a liability under the net worth test.
Further, any increase in the loan amount in the 60 days prior to your purchase of the securities (even if the loan amount doesn’t exceed the value of the residence) will count as a liability as well. The reason for this is to prevent net worth from being artificially inflated through converting home equity into cash or other assets.
While your individual circumstances will vary, the following table sets forth examples of calculations under the net worth test in order to determine crowdfunding investment limits
Investing in startups and other private companies is highly speculative and could result in the complete loss of the investment. In addition, you will not be able to resell securities acquired through Crowdfunding for a period of one year, subject to certain limited exceptions, including sales back to the issuer, to accredited investors, to family members under certain circumstances (i.e. death or divorce). However, even after the restricted period, there is no guarantee that there will be a market for the securities.
Equity Crowdfunding is the online offering of a startup or private company’s securities for investment. Title III of the Jumpstart Our Business Startups (JOBS) Act permits anyone to invest in these securities offerings up to certain investment limitations. These crowdfunding investments are made directly through the crowdfunding platforms, which are acting as a registered crowdfunding portal, and investors may participate in these offerings by investing directly through the crowdfunding platforms’ website. Investors who are interested in participating need to carefully consider whether investing in crowdfunding offerings is appropriate for them, meaning that each investor has the risk tolerance to invest in an offering that involves a high level of risk and that the investor can sustain the loss of some or all of his or her investment.
Risks of Investing. Investing in startups and other private companies is highly speculative and should only be done by investors who can bear the complete loss of their investment without any change in their lifestyle. Risks include, but are not limited to an issuer’s: (i) limited operating history, (ii) lack of liquidity or any market for the resale of your investment, (iii) possibility of fraud or misrepresentation, (iv) arbitrary valuation of the company, (v) limited shareholder rights and the possibility of dilution (meaning the reduction in the ownership percentage of a company caused by the issuance of more shares), (vi) inability to generate revenue or raise additional capital to fund operations, and (vii) inability to continue its relationship with the crowdfunding platforms or to publish annual reports where an investor obtains the most current financial information about an issuer. An issuer has ongoing reporting requirements to post an annual report no later than 120 days after the end of the fiscal year along with the financial statements of the issuer certified by the principal executive officer of the issuer to be true and complete in all material respects and a description of the financial condition of the issuer, and if an issuer has available financial statements that have either been reviewed or audited by a public accountant that is independent of the issuer, those financial statements must be provided to investors along with certification by the principal executive officer, and specific disclosures. In some instances, however, an issuer may fail in its obligation to publish annual reports and, therefore, an investor may not continually have current financial information about the issuer.
Investment Limits. Regulation Crowdfunding limits the amount of money you can invest. If either your annual income or your net worth is less than $100,000, then during any 12-month period, you can invest up to the greater of either $2,000 or 5% of the lesser of your annual income or net worth. If both your annual income and your net worth are equal to or more than $100,000, then during any 12-month period, you can invest up to 10% of annual income or net worth, whichever is lesser, but not to exceed $100,000.
Transfer Restrictions. You will not be able to resell securities acquired through Crowdfunding for a period of one year, subject to certain limited exceptions, including sales back to the issuer, to accredited investors, to family members under certain circumstances (i.e. death or divorce). However, even after the restricted period, there is no guarantee that there will be a market for the securities.
Cancellation Rights. You have the right to cancel your investment commitment in an offering at any time until 48 hours prior to the deadline identified in the issuer’s offering materials. After that, your investment will be final.
No Investment Advice or Recommendations. Gold Eagle does not provide any investment advice or recommendations. Our success probability of an offering on the portal is neither a recommendation, solicitation or endorsement of the offering by us. Any decision to invest shall be based solely upon your own evaluation and analysis of the offering and is made at your own risk. You are strongly advised to consult with your investment advisor before making any investment.
Limited Due Diligence. You are responsible for conducting legal, accounting and other due diligence review on the issuer’s and offerings posted on the Portal and to determine whether the investment is suitable for your investment needs.