Elizabeth Carter, Esq., is a crowdfunding securities attorney who represents investment companies, small businesses, nonprofits, cooperatives, and other social enterprises with the legal strategy and compliance of raising capital from both accredited and non-accredited investors.
Her most recent work includes assisting a driver-owned ride-share cooperative with its $1.07 million crowdfunding debt offer to both accredited and non-accredited investors through Regulation Crowdfunding.
She is currently Of Counsel to Cutting Edge Counsel, a community capital securities law firm where she further provides securities legal services to businesses, funds, and cooperatives, including the provision of securities legal services to a cooperatively-owned investment fund that conducted a $2 million crowdfunding offer to accredited investors through SEC Rule 506(c).
Similarly in this role, she assisted a consumer cooperative with the amendment of its by-laws and articles of incorporation in order to prepare for its upcoming capital raise from non-member investors.
Elizabeth’s prior work includes the legal representation of entrepreneurs, property owners, small businesses, nonprofits and government agencies in various community economic development initiatives including drafting a joint venture agreement on behalf of a minority-owned redevelopment entity in order to promote inclusionary development; serving as general counsel to a limited-equity housing cooperative with over two hundred affordable housing units for seniors, and persons of low income; assisting a community development nonprofit with the selling of real estate for the development of affordable housing; representing a government agency with property tax lien issues in order to assist in the removal of blighted properties; reviewing, drafting, and negotiating commercial real estate contracts on behalf of a small businesses; and helping to prevent a tax lien foreclosure on behalf of a low-income property owner through the negotiation and drafting of a third-party investor real estate agreement.
She also served as Special Counsel in the Department of Economic and Housing Development of the City of Newark where she was lead counsel on a $8.1 mill affordable housing cooperative project and authored the City’s amended tax abatement ordinance which provides tax incentives for inclusionary development by women, racial minorities, and cooperatives.
Elizabeth also founded and served as Lead Counsel & Executive Director of the Urban Cooperative Enterprise Legal Center, Inc. (@ucelc), a 501c3 nonprofit organization with a mission to create and support cooperative enterprises within marginalized communities in order to promote local sustainability.
Currently, Elizabeth is on the Board of Directors of the Co-op Ed Center, and serves on a number of Advisory Boards including the Advisory Boards of Seaway, A Division of Self-Help Federal Credit Union; National Public Housing Museum; and the Lawndale Christian Community Development Corporation of Chicago.
She also serves as Director of Community Planning and Economic Development of the 20th Ward Ald. Jeanette Taylor’s office in Chicago, IL and is a Visiting Professor at the University of Illinois Chicago School of Law.
Elizabeth graduated from the University of Michigan with honors, double majoring in African American studies + political.
What You’ll Learn In This Episode
- A legal fund to support Black-owned small businesses
- How legal fund help support businesses
- How businesses and individuals contribute to the fund with a tax-deductible contribution
This transcript is machine transcribed by Sonix
Intro: [00:00:04] Broadcasting live from the Business RadioX studio in Chicago, Illinois, it’s time for Chicago Business Radio brought to you by Firm Space, your private sanctuary for productivity and growth. To learn more, go to FirmSpace.com. Now here’s your host.
Max Kantor: [00:00:21] Hey everybody, and welcome to Chicago Business Radio. I’m your host, Max Cantor, and we have a great show for you all today. But first, as a reminder, our show is sponsored by firm space without firm space. We couldn’t be sharing these important stories that we do. So let’s jump right in. On today’s show, we have the managing attorney of Elizabeth L. Carter, Esq., LLC. Please welcome to the show, Elizabeth L. Carter. Welcome to the show, Elizabeth.
Elizabeth L. Carter: [00:00:50] Thank you. Thank you for having me. Lovely intro.
Max Kantor: [00:00:52] Oh, thank you. I’m excited to have you on. So let’s jump right into things. How are you serving, folks?
Elizabeth L. Carter: [00:00:58] Oh, well, yeah, that’s a good question. A loaded question. But I’ll say today, and at this moment, I, as you mentioned, I manage a law practice called Elizabeth L. Carter Esq. LLC, which is a crowdfunding securities law firm with the intent of providing legal strategy and compliance surrounding the offer of security. So if you’re a business owner that looking to raise capital from investors, I will help with the legal strategy around that, as well as making sure that it’s legal and compliant with both federal and state law and my firm specifically focus on underrepresented founders. So or businesses to nonprofit so namely black owned Afro-Latin own because of the limited and insufficient resources for these businesses, including legal. So I want it to be accessible to the community that otherwise wouldn’t be served.
Max Kantor: [00:01:46] Definitely. Now you talk about raising capital or crowd funding. I know all about crowdfunding, like for Kickstarter. What’s the type of crowdfunding that you’re specifically doing?
Elizabeth L. Carter: [00:01:57] Yeah. So Kickstarter is what you would call rewards based crowdfunding and go fund me. That’s what you would call a donation base. And then the type of crowdfunding that I’m specifically referencing, especially when it comes to the legal strategy. The law part of it are called investment crowdfunding, so rewards is similar to donation and that donation service the easiest donation is Hey, I have a business. Can you all just support me and you get nothing in return? You just helping it, helping me out? You want to see this project come off the ground and you all want to see a great asset in the community. Help me out and donate rewards is similar, except that rewards is saying, hey, in exchange, there is a small token of appreciation, so to speak, right? But you have to be careful because some states have found what they would deem as a rewards crowdfunding and actual investment crowdfunding offer and the states. The regular regulations there or the securities office there will harp down and say, Hey, actually, you’re selling a security. And so what makes the security rewards different is that although the rewards are saying you get something in return, it’s not so expensive or so valuable to be deemed as a security. So a security is any time someone’s giving you money with an expectation over time and passively give you money. So it’s a difference max that you and I decide to go on business together. We’re co officers. I don’t know. Maybe you’re the CEO, I’m the CFO or something. We’re both working actively in the business, but we have money in the business as well. In other words, we invest it, but that’s different from a security because we’re actively involved in the company. However, if Max, you have a company, you say, Hey, Elizabeth, I’m raising funds, can you help me out? And in return, you get a share of the profits, you get a share of the company’s ownership.
Elizabeth L. Carter: [00:03:39] And I don’t do anything else but just give you money, and I walk away and live my life and I rely on your expertize that’s called a security. So the SEC, which is the Securities Exchange Commission, the federal agency, as well as the state or state relevant ones there they call it, I don’t know, Illinois Securities Office or something. And what they do is they want to protect my step, that passive investor, they want to make sure that max and this example that you’re going to do the right thing and make sure that you’re not defrauding Elizabeth when she’s giving your money because she doesn’t know what’s going on because she’s passive, right? So that’s the difference. So when the rewards come into play, what happened in that particular example that I mentioned earlier is that I think it was a motorcycle that they were raising funds or funds for and say, Hey, if you give me money in exchange, we’ll give you a motorcycle, right? Once you develop them it to manufacture these motorcycles. The state security regulators said, Hey, that’s actually a very valuable asset to see the return because they gave you four thousand and in return they received a motorcycle that was worth five thousand. So they actually received something on top of that money that they gave you. So those nuances are very important because people just don’t know, and they can be engaging in something that gets them in trouble unless they have a lawyer or a securities lawyer, someone that’s competent in capital raising that can help guide them there.
Max Kantor: [00:04:56] Yeah, for sure. And you explain that beautifully. Very well said. And. I got to tell you, you said that if we went into business together and I’d be the CEO and you’d be the CFO. No, no, no, I would not be the CEO. No way. Not after that explanation. Not me. So, but hearing you explain everything, I’m curious how do investors get their money back?
Elizabeth L. Carter: [00:05:17] Well, it could honestly, any investments rescue, which is which is always sort of the general, OK, time Typekit your money here. There’s a risk you can lose it all. However, you or whoever’s raising the funds should actually go more specific and say, Well, why is it particularly risky to invest? I don’t know in the cannabis business and in a state like, I don’t know, let’s see New Jersey, New Jersey that has to legalize cannabis. Yet as far as regulation, well, it’s really risky because you may have a lot of fee fees and criminal penalties, and all your money can be lost because a state may say that wasn’t a valid contract. So so these things need to be disclosed. And so the idea, though, is that it should be written down on paper and your investment documents, how this founder or this business owner is going to return your money. They should do the analysis. They should hire a financial adviser or accountant. You can do some projections, especially if they’re a startup with no revenue, right or even if they have some revenue. There’s there’s calculations, there’s formulas to kind of predict what the outcome financially would be. And and so you should do that now. Some, especially in crowdfunding, I should say, especially, I think even the VC world venture capital, there isn’t a lot of that due diligence happening in terms of literally calculations in numbers. Sometimes I think in the venture capital world, they do have a lot of resources and software to kind of predict these things, but it’s almost like going to the doctors and the doctor, the medical doctor.
Elizabeth L. Carter: [00:06:48] He’s practiced, I don’t know, 40 years. He can look at a lump on your phone for him and say, Oh, I know exactly what that is versus a new doctor. I have to go back research. Do some look into the books? Is it a mole? Is it this? And so that’s sort of the venture capital investor versus the crowdfunding invested. The venture capital investor is more of an expert because this is what they do. They have again, they have courses for it, right? You go to you’re your financial advisor, whereas the crowd fund investors, your neighbor, it’s your friend, it’s your customer who isn’t necessarily an investor by trade but want to support you. And so you want to make sure you disclosing everything in layman’s terms that they can understand because they may not understand how they’re getting their money back. So part of this, you doing your work, putting it down and doing your your due diligence and say, this is how I project and how I predict. And then you can also say, Listen, I don’t know. I don’t know how I’m going to give it back. So long as you say that and the investor is OK with that, then you’re fine. As far as legally, you’re fine because you’re disclosing that fact. You know what I mean? You’re disclosing? Well, I don’t know exactly, but I can tell you that I’m going to work hard and people believe in you. And so long as you say I do, I mean, of course, you’re going to put in better words. But basically the gist is saying, I haven’t done the numbers and you will see it because there’s nothing in your disclosure documents that show that you got the numbers right.
Elizabeth L. Carter: [00:08:03] And so you’ll see a lot of that, too. In these documents, they may say well up on the discretion of the manager or the CEO, and that doesn’t tell the investor anything. It doesn’t tell you if you’re going to get dividends next month or on a quarterly basis or a year, just says whenever the CEO deems it worthy or deems it feasible to do that. And there’s nothing wrong with that, but it doesn’t give you a lot of insight. So all that long way of saying it really just depends on what the business owner has, what kind of homework they have done, and what kind of financial analysis they’ve done themselves to say, OK, this is how I’m going to return money. In addition to the financial returns, going back to the risk factors like going back to the cannabis example. Part of that is even if you had a small business model and you know exactly going to make a million dollars next year and you laid it all out financially or in the mathematically and everything is on point a, it’s not guaranteed because of a prediction, but also the idea that it’s an illegal enterprise that none of that matters, right? And so that’s also something to consider. What are some other non-financial risks that can actually make affect the investment so that the investor may or may not receive their funds may lose all their investment, right?
Max Kantor: [00:09:12] So, yeah, definitely. So I’m I want to know, how does your legal fund help support these businesses that come to you? Because as we were talking, you know, there’s all these complex laws regulations. It’s difficult. It’s hard, especially if you’re a small business. There’s a lot of stuff you might not know. So how does your legal fund help support these people who come to you?
Elizabeth L. Carter: [00:09:35] Yes, I’m glad you brought that up. So I’m super excited about this fund because it solves a problem even within a solution. So let me explain what I mean. Crowdfunding was designed to be a solution for a problem, and the capital raising will, in other words, before the Jobs Act of 2012, which is what instituted and made legal, this raising capital from nationally from both accredited investors so accredited, meaning you make over 200 K a year over one million dollars a net worth as an individual. And then as well as nine accredited investors, those basically the 90 percent of the country, right? Those who don’t make that much and don’t have that network that. Accidents were allowed, and then the amendment in 2015 allowed for non-accredited investors to get involved on a national scale. In general, advertising so you can just publicly advertise these things, of course there’s restrictions we have to go into that, but it changed the game a bit in terms of investing, whereas before that was really relegated to wealthy individual people that, you know, because it was much more costly to try to reach out to a noncredit investor that you don’t know than it was for a credit, invest that you do know. And so crowdfunding was designed to democratize capital raising to say, Hey, small business is a do not have the type of funds or the type of revenue to pay hundreds of thousand dollars a year to register their business with the SEC like like IPO or public companies do now, right? So one, it helps with that.
Elizabeth L. Carter: [00:11:04] So there’s exemptions where that is do not have to register so long. They follow these particular rules, right? Then the other side is OK. In addition to that, it opened up the floodgates in terms of where they can get their money from now. They can literally reach out to their customers and reach out to their supporters and members and followers on Instagram to say, Hey, I’m raising funds. You want to support as little as as much as you want five dollars, one hundred dollars, so it makes it more accessible. However, there’s still a cost to raising capital so that business owner, it looks easier now and it is easier, I should say. But there’s still that compliance or that we just got on talking about right there. So those drafting those documents, the investment documents, the risk factors, making sure that you’re laying out all the particulars so that you can say that you’re not misrepresenting any investor, what your business can do, right, that costs and that’s the legal compliance, let alone the accounting that comes with it, let alone the marketing that comes with it. So there’s this upfront pre-seed cost that that is there, that a lot of lot many founders, particularly black and letting founders just do not have because of generational wealth just didn’t pass down the same way. So friends and family is what I’m speaking about his friends and family around.
Elizabeth L. Carter: [00:12:12] It’s a term of art within a capital raising space that basically means historically was you can literally go to your grandfather, you’re your heir to the throne. You can say, Hey, I need five k one hundred k for my idea. Please, Grandma, give it to me. Oh, here you go. Right? We have an extra cash to give it and invest in our grandson, our son or daughter. And usually a son, a white male right. And usually in that in back in the day. And so now moving forward in the modern age, it’s still they still use that now the the friends and family may not be literally your friends and family, but they’re your network. There’s their wealthy, other wealthy Silicon Valley investors or people that are around you in that space, but underrepresented, marginalized and people of color just do not have that same network. And so even within the community, they can’t pool that much amount of capital together in order to even even raise the crowd funding. So I say that’s to say my fund is designed to help offset those costs, particularly the legal costs, by subsidizing and calling on our community collectively and say, Hey, this public is my friends. Let’s help these black owned businesses to raise capital sustainably and legally, because otherwise people just go in without their legal legal shell and put themselves at risk.
Max Kantor: [00:13:23] So how much money are you looking to raise through the fund?
Elizabeth L. Carter: [00:13:28] As much as possible, so I can give you an example of how much it costs legal, just legal, so on average, I mean. So there’s regulation crowdfunding, which is probably the the most accessible and the one that that has the least amount you can raise in a year. Right now, it’s up to five million to go through a Portal Regulation crowdfunding portal to do so that on average costs about twenty thousand legally to do and competent counsel. So what I did is I was engaging in this practice. I decided I knew that I couldn’t compare my firm to sort of the typical securities law firms, especially where I have a mission to be accessible to those who just don’t have that type of funding for the most part, right? And so I decided to do my own analysis of my own sort of internal pricing and say, OK, what will it cost my firm to do this and so on? Or for that particular offer, the chief is about around 10 K, right? So you think 10K per founder, we have over 50 applicants, so we really won’t need to raise as much as possible knowing that we probably won’t raise the entire book. But I think as much as as much as we can, we’ll definitely do a whole lot to help subsidize and subsidize can be hard. It can be take a thousand dollars whatever we can do to help the founders sustainably do so. Yeah, because we also do other things that partner with other organizations like the nonprofit that I have as a fiscal sponsor. Again, if you’re if anyone’s interested in donating, you also can get a tax deduction. But that particular nonprofit, we’ve done work in the past where they subsidize literally half the cost of whatever the client needed right to do their work. So I’ve done that already. The fun is just doing it and going more deeper into it and try to help many more as possible.
Max Kantor: [00:15:14] So to help as many as possible and to raise as much money as possible, how can local businesses or and or the community help? How can our listeners help you in the fund?
Elizabeth L. Carter: [00:15:25] Yes, I’m really just share the so you go to the website WW w e l c e Ask.com Legal Fund. All one word. Share that for a while we have we were featured in Black Newscom Black Enterprise. Com Share that article firmwide. We have a press release. You can contact me at info at ELCA to get that and really spread that around. And then also, of course, donating, right? Like I said, you can donate directly to the law firm through that website, or you can donate through our fiscal sponsors, which are typically for large and I say, larger, more than twenty five dollars, right, that they’re they’re willing to accept on behalf of the fund. And there you can receive a tax deduction or deductible ability on your donation. So really just sharing far and wide and I’ve had people do that and really have great feedback. Even this podcast, you guys just illustrating and showing you on your website helps a lot. And then, of course, the money, right? You just donate the cash. They’ll be very helpful.
Max Kantor: [00:16:27] Well, what you’re doing is super important and it’s super valuable to the community. And I have to ask you and you’re probably this answer. There’s so many different ways you can answer it, but what for you is the most rewarding part of this fund?
Elizabeth L. Carter: [00:16:42] Oh, I’ve had I love the application process. Part of the application process was for them to send a video to just explain who they are. Illustrate and show I wanted the people to see a real face around, like, what does this business owner looks like? What I mean? We had investment funds. People who are interested create investment funds. We have, you know, someone who invented something called a dental wig and she has a patent like these are very investable, but businesses that that anyone would want to invest in. These are businesses that are viable, that have great plans. So one of them, I’ve seen them work. I’ve been I’ve been in touch with them before, so I’m seeing them from afar that they’re raising funds of their own. And so that’s the most rewarding is seeing how hard people work, seeing how valuable their ideas are and their businesses are, and being able to contribute and support them. The best way that I can do not only the legal but bringing on my community and the community abroad to say we all need to support you and just backing them. Because one thing one of my motivation is for even becoming a crowdfunding securities lawyer, whereas before I was more of a broader development lawyer. Real estate development. But one reason why I decided to be sort of in the finance business for a securities world was I will see so many talented entrepreneurs and they will reach a plateau. And that plateau was they actually needed capital to grow and to sustain, and they didn’t have it. And so this is really the most rewarding part of seeing that the need is there and to illustrate to the rest of the world the need is really there and that we need the support and the resources. And so just sharing that and just sharing the burden, I so to speak that it’s not just on one person or one firm or one fund, but all of us can be part of the solution.
Max Kantor: [00:18:24] Definitely. It’s so awesome hearing you talk about it and all the stories. I’m sure you’re going to have and that you have had already as your fund continues to grow and all the businesses that you help now and in the future, it’s really exciting work that you’re doing. And before we wrap up, what was that website again for people if they want to donate to your fund?
Elizabeth L. Carter: [00:18:44] Oh yeah. So w w w dot e l c e s q slash legal fund. All one word word l a l f you and b gotcha.
Max Kantor: [00:18:59] Well, Elizabeth, thank you so much for being on the show today. You’re really doing important work and we appreciate all you do for the community.
Elizabeth L. Carter: [00:19:06] Thank you so much, man. I really appreciate you having me on,
Max Kantor: [00:19:08] Of course, and thanks to all of you for listening. Once again, this episode was sponsored by firm SpaceX, and we will see you next time.
Intro: [00:19:17] This episode is Chicago. Business Radio has been brought to you by firm SpaceX, your private sanctuary for productivity and growth. To learn more, go to Firme Space.com.