The problem was in the solicitation of people to participate in a share issuing entity that wasn't registered with the government after they paid money to participate. (basically selling shares).
The law is setup to prevent people from buying/selling shares of hypothetical inc. without talking to the government first.
Also with the raw number of people who had shares(120+) that more quickly draws the governments ire than two people trying to found a company together and it fails. Advertising for a company co-founder doesn't fall into this problem space.
Atlanta's startup weekend company is apparently in the clear. Not sure what the difference is between the two.
In Atlanta's, the actual startup was an C-corp owned in part by Startup Weekend, LLC, in part by Atlanta Startup Weekend LLC, and the rest by the "core team" that existed after the weekend. People who participated in the weekend were given shares in Atlanta Startup Weekend, LLC, and not the C-corp. I think this was done to avoid any complications with the SEC, since LLCs are governed far less strictly.
What on earth is the point of such a thing? Seems more like a world record stunt, like a group of people making a mile long burrito, than a serious endeavor.
It's an opportunity for Burrito lovers to connect and indulge their passion whilst creating a remarkable (and delicious) Burrito. Some of them may even go on to create other even tastier Burritos.
You may be breaking the same law, but you're probably breaking half a dozen other laws at the same time (zoning, etc) and this one seems no more likely to affect you.
I suspect that corporate lawyers are mistakenly worried about irrelevant laws being broken, but I don't know if that's the case here: 100-person startups formed over a weekend face unique legal challenges.
IANAL, but IIRC, once you have over a certain number of shareholders (and it's somewhere in that neighborhood), you are effectively a public company. Which means you get screwed by SarbOx.
(And you've already had your "IPO", so there goes even more money).
Challenging? The problem is getting the entire entity legally registered. It takes more than a weekend, apparently.
That said, the barriers to starting a business in the US are not unreasonable. Having read "The World is Flat (2.0)" and recalling the hurdles encountered in other parts of the world, The US is pretty good, but not the best, and far from the worst. No place in the world, though, allows it to be done in a weekend.
A healthier and more legal approach is to auction the resulting IP to an individual or a small group out of the participating people and divide the proceeds among the rest of the participants.
You can't afford to maintain 100 employees in a startup, and it is foolish to have 100 equal stock holders in a startup, every decision will take months. But if you auction the IP, the person or group with the most faith and ability to further the startup will buy it from the rest of the participants and the rest will have had fun and gotten some financial restitution for their work.
The law is setup to prevent people from buying/selling shares of hypothetical inc. without talking to the government first.
Also with the raw number of people who had shares(120+) that more quickly draws the governments ire than two people trying to found a company together and it fails. Advertising for a company co-founder doesn't fall into this problem space.