Why do I need an attorney before asking someone to invest in my company?
Many business owners unknowingly violate securities law when they ask people to invest with them.
You have several options for raising capital without going through an official stock exchange, such as crowd funding and general solicitation. Each option has legal requirements, some of which must be completed even before you start asking people to invest.
Who can I legally ask to invest in my company?
It used to be that companies that aren't listed on a stock exchange were prohibited from asking most people to invest. In September 2013, the rules changed, so now you can ask anyone to invest.
But you can't yet accept money from everyone, and before you ask anyone for money, there are things you need to do to avoid breaking the law.
Who can I legally sell shares of my company to?
Even though you can now legally ask anyone to invest with you (as long as you've completed all the prerequisites), you still can't legally accept investments from just anyone.
In 2014, new equity crowd funding rules took effect which allow everyone to invest. However, there will still be restrictions regarding how funds can be raised, whether a broker is required, how you can advertise, limits on how much most people can invest, and many other rules that you'll need to follow.
What legal requirements must I meet before getting started?
Most business owners don't realize that even asking people to invest in them before completing certain requirements can violate securities law and get them in a lot of trouble. And the rules and requirements vary by state, by how much money you'll be raising, and various other factors.
The changes to equity raising rules have opened up vast new opportunities for both investors and companies seeking to raise capital. But it is still important to work with an attorney who has experience with securities law and understands how the new rules apply to your specific circumstances. For example, would you be better off seeking "crowd funding", or going with a 506(c) offering? And how do the requirements for each differ?
EVN Law can help.
We can help you choose which method of raising capital best fits your needs and goals, and help you navigate the requirements to solicit investment and raise capitally legally. We can also help you get back on track if you have started raising capital without meeting the requirements of the law.
To discuss what we can do for you, let us know the best phone number where we can reach you or make an appointment.