Congress is considering legislation by which the Securities and Exchange Commission would lift limits on private equity investments, letting companies sell equity interests to investors online (“crowd funding”). Today the Wall Street Journal published a debate on this topic (Should Equity-Based Crowd Funding Be Legal?).
This post is based on a Quora question in which a user who already had invested money in his corporation wanted to know how he can invest an additional amount. My answer, reproduced below almost verbatim, starts by summarizing the steps for an initial equity investment.
Let’s assume you did your startup paperwork properly: The board of directors approved issuing some or all of the corporation’s authorized shares to you in exchange of payment of certain consideration; you deposited that consideration into the corporation’s bank account; the secretary recorded your share ownership on the corporation’s share transfer ledger and issued a share certificate to you.