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By Adam Popescu 2013-09-19 15:17:37 UTC

On Monday, a new law takes effect that could change the face of startup investing.

The Jumpstart Our Jobs Act (a.k.a. the JOBS Act, which has nothing to do with jobs) is a bill that President Obama has called game-changing for its ability to help startups grow, hire and raise funding. Perhaps the most valuable (and least understood) part of the law is how it will alter the rules of startup advertising and investing.

Per the bill, the SEC  will lift a 80-year ban on general solicitation of accredited investors  (accredited refers to anyone with a net worth of $1 million, annual income of $200,000 for the last two years, or $300,000 combined with their spouse). This means startups can advertise everywhere — from billboards to television commercials.

For most, these changes remain a legal gray area filled with more questions than answers. To help shed some much needed light, here are three key tips for entrepreneurs on the do’s and don’ts of the new law.

1. Soliciting Funds

Businesses are free to advertise their funding needs as they see fit. This means anything from highway billboards, newspaper ads, or crowdfunding platforms, explains Judd Hollas, the CEO of EquityNet. a crowdfunding company that has raised more than $200 million analyzing privately-held businesses and estimating valuations, risk and investment return.

Hollas tells Mashable this advertising change will be a shot in the arm for startups. Thousands of previously inactive accredited investors will expand the available pool of capital for young businesses, he says.

Another crowdfunding option is Invested.in. a white label solution for companies looking to create custom fundraising platforms. The Los Angeles startup already powers sites for brands like Coca-Cola and ATB Financial.

In 2012, Invested.in partnered with Xpert Financial’s Adam Draper, the son of mega Silicon Valley VC Timothy Draper. The two launched a startup marketplace turned accelerator called BoostFunder for both eager startups to raise up to $1 million and for investors to browse and pledge investments. The format is Kickstarter meets AngelList.

2. Verifying Investors

Before accepting any money, businesses must verify that all investors are accredited. Previously, only self-accreditation was required, but now potential investors must disclose income, assets and financial statements, as well as fill out Form D  with the SEC.

Business must actually ask for documentation from the investor that supports their accreditation status, based on income, assets, or other qualifications, Hollas says.

But it may not be as easy as asking, warns Alon Goren, the founder and president of Invested.in. Goren thinks the added hassle of filing paperwork and revealing a company’s financial details may deter some from taking advantage of the change, which he describes as against the spirit of the JOBS Act.

It’s a benefit-loss equation every entrepreneur and business must determine for themselves, but no risk equals no gain. Skittish companies may be those without positive revenue streams and profits. You can find more helpful rules from the SEC here .

3. Vetting Potential Investments

Investing in a company doesn’t automatically equate to earning money. Even a seemingly sure return can turn out to be a big loser. Thus, Hollas advises that investors should always perform due diligence on capital-seeking businesses.

A comprehensive due diligence checklist includes combing through a company’s articles of incorporation (tax returns, audit reports, legal tax bills, personal property bills), legal documents and board and shareholder meeting minutes. To combat risk, Hollas suggests investing in a diversified portfolio of startups within different industries.

An iteration of the law in which investors can put money into crowdfunded mutual funds is likely a few years away.

Invested.in’s Goren also wants a more streamlined process for businesses and investors and more options without stringent rules.

If enough startups speak up, more changes could be enacted. It probably won’t take another 80 years for this law to change again, but it’s not an overnight process, either.

What do you think about the new bill? What would you do differently if you were the one writing the legislation? Sound off in the comments.