Raise Money for Your Business

RAISE MONEY FOR YOUR BUSINESS

       How do businesses grow and prosper in our country? They raise money through legal securities offerings with notice to or registration with the Securities and Exchange Commission of the United States Government.

        It is not legal to solicit investors for a business without complying with securities laws. Notice to or registration with the SEC regarding a Company's stock, debentures and promissory notes may be required. Legal counsel is therefore essential for any business that wants to raise money and expand.

        Identifying potential investors, providing them with information required by law, and enabling them to make an informed decision about investing in an enterprise is legal and even supported by our government.

        Any information a Company provides to investors must be free from false or misleading statements. A Company should not exclude any information if the omission makes what is provided to investors false or misleading. All transactions are subject to the antifraud provisions of the securities laws.

Registered/Public Offerings - Unlimited Funds

Registered/Public Offerings - Glossary

Smaller Reporting Company. Generally, this is a private Company that had annual revenues of less than $50 million for the past year or a public Company that has outstanding securities valued at less than $75 million computed according to SEC regulations.

Registered/Public Offerings - Unlimited Funds

Approximate average time from consultation to completion of documents/filing: two months, depending on accountant’s time frame.
Time from completion of documents/filing to selling: depends on SEC time frame.
Attorney’s fees not including accounting fees: $25,000.00 to $100,000.00 depending on complexity.
        Registered securities can be offered publicly to an unlimited number of investors and are not Restricted, meaning they are freely tradeable in the secondary market after the offering.

        The most commonly used registration form is lengthy. It describes your business and its: properties; competition; officers and directors and their compensation; material transactions between/among the Company, its officers and directors; material legal proceedings involving the Company or its officers and directors; the plan for distributing the securities; and the intended use of the proceeds.   Risks must be described, including: business history; adverse economic conditions; lack of market for the securities; and dependence upon key personnel. Audited financial statements for two years or the life of the Company, whichever is shorter, are required.

        In some cases, the registration form selected allows documents on file with the SEC to be incorporated by reference.

        Smaller Reporting Companies are subject to less onerous reporting requirements. To raise unlimited funds from investors, there is a Safe Harbor. Audited financial statements for two years or the life of the Company, whichever is shorter, are required.

Exempt Offerings - Private Placements

Exempt Offerings - Private Placements - Glossary

Accredited Investors. Wealthy investors meeting net worth and income standards established by the SEC.
Blank Check Company. A development stage company that has no specific business plan or purpose or has indicated its business plan or purpose is to engage in a merger or acquisition.
Business. See Company.
Company. A business or enterprise, including a corporation, limited liability company, partnership and limited partnership.
Form D. Notice to the SEC that includes information about the offering, the Company, its owners and securities promoters.
Private Placement. Issuance of securities that are not registered with the SEC. In general, private placements are less expensive, quicker and often subject to less disclosure than registrations.
Reporting Company. Certain public companies required by securities laws to file quarterly, annual and other reports with the SEC.
Restricted Securities. Shares, debentures or notes that may not be re-sold within six (6) months after purchase without SEC registration.
Safe Harbor. A set of rules that, if followed, assure that a business complies with the law.
Solicitation. General solicitation or general advertising, including advertisements, articles or notices appearing in newspapers, magazines, on TV, radio or media, as well as seminars or meetings whose attendees have been invited through such ads or notices.
Sophisticated Investors. Investors with sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment.

Private Placements - Raising Up to One Million Dollars

Approximate average time from consultation to completion of documents/filing: one month. If accountant is used, time frame may vary depending on accountant’s time frame.
Time from completion of documents/filing to selling: no wait.
Attorney’s fees not including accounting fees: $10,000.00 to $25,000.00 depending on complexity.

      If your Company is not a Reporting Company or a Blank Check Company and you want to raise up to a million dollars for your enterprise, the simplest notice available under SEC rules can be used to facilitate your goals. Sales must occur within a 12 month period. Solicitation is prohibited, and in most cases purchasers receive Restricted Securities. You must also comply with the laws of the states in which the securities will be sold. Form D is needed.
        You can use this exemption for a public offering of your securities and investors will receive freely tradable securities under certain circumstances, depending on the state selected. In that event, the time frames listed above will vary according to the time frame for state review.
        Form U-7 is used for certain regional offerings in which review by multiple states can be consolidated.

Private Placements - Raising Up to Five Million Dollars

Approximate average time from consultation to completion of documents/filing: two months, depending on accountant’s time frame.

Time from completion of documents/filing to selling: no wait.

Attorney’s fees not including accounting fees: $10,000.00 to $50,000.00 depending on complexity.

If you want to raise up to five million dollars, audited financial statements for two years or the life of the Company, whichever is shorter, are required. Sales must occur within a 12 month period. For this offering, an unlimited number of Accredited Investors and up to 35 other persons who do not need to satisfy sophistication or wealth standards are permitted. If there are non-Accredited Investors, disclosure is the same as for a registered offering. Solicitation is prohibited, and in all cases purchasers receive Restricted Securities. Form D is needed.

Private Placements - Raising Unlimited Funds

Approximate average time from consultation to completion of documents/filing: two months, depending on accountant’s time frame.

Time from completion of documents/filing to selling: no wait.

Attorney’s fees not including accounting fees: $10,000.00 to $50,000.00 depending on complexity.

To raise unlimited funds from investors, there is a Safe Harbor. Audited financial statements for two years or the life of the Company, whichever is shorter, are required. Solicitation is prohibited. The Company may sell its securities to an unlimited number of Accredited Investors and up to 35 other purchasers, who, either alone or with a purchaser representative, must also be sophisticated investors. Purchasers receive Restricted Securities. If there are non-Accredited Investors, disclosure is the same as for a registered offering. Form D is needed.

Other Offerings

Intrastate Offering Exemption

Approximate average time from consultation to completion of documents/filing: two months. If accountant is used, time frame may vary depending on accountant’s time frame.

Time from completion of documents/filing to selling: wait depends on state review time frame.

Attorney’s fees not including accounting fees: $10,000.00 to $50,000.00 depending on complexity.

Company must be incorporated in the state where it is offering the securities; carry out a significant amount of its business in that state; and make offers and sales only to residents of that state who do not resell the securities for a prescribed period. A Safe Harbor is available.

Regulation A - Raising Up to Five Million Dollars

Approximate average time from consultation to completion of documents/filing: two months, depending on accountant's time frame.
Time from completion of documents/filing to selling: depends on SEC review time frame.
Attorney’s fees not including accounting fees: $15,000.00 to $50,000.00 depending on complexity.

Exempt offering not exceeding $5 million in any 12-month period. The offering statement describes your business and its: properties; competition; officers and directors and their compensation; material transactions between/among the Company, its officers and directors; material legal proceedings involving the Company or its officers and directors; the plan for distributing the securities; and the intended use of the proceeds. Risks must be described, including: business history; adverse economic conditions; lack of market for the securities; and dependence upon key personnel. Like registered offerings, the securities are not "restricted," meaning they are freely tradeable in the secondary market after the offering. The principal advantages of Regulation A offerings, as opposed to full registration, are:

The financial statements are simpler and don't need to be audited;
There are no Exchange Act reporting obligations after the offering unless the Company has more than $10 million in total assets and more than 500 shareholders;
Companies may choose among three formats to prepare the offering circular, one of which is a simplified question-and-answer document; and
You may "test the waters" to determine if there is adequate interest in your securities before going through the expense of filing with the SEC.

Reporting Companies and Blank Check Companies cannot use Regulation A. In most cases, selling shareholders may use Regulation A to resell up to $1.5 million of securities.

If you "test the waters," you can use Solicitation prior to filing an offering statement with the SEC, giving you the advantage of determining whether there is enough market interest in your securities before you incur the full range of legal, accounting, and other costs associated with filing an offering statement. You may not, however, solicit or accept money until the SEC staff completes its review of the filed offering statement and you deliver prescribed offering materials to investors.

Accredited Investor Exemption - Raising Up to Five Million Dollars

Approximate average time from consultation to completion of documents/filing: one month, depending on accountant’s time frame (if an accountant is used).

Time from completion of documents/filing to selling: no wait.

Attorney’s fees not including accounting fees: $10,000.00 to $50,000.00 depending on complexity.

The total offering price is less than $5 million. Solicitation is prohibited.

California Limited Offering Exemption - Raising Up to Five Million Dollars

Approximate average time from consultation to completion of documents/filing: two weeks, depending on due diligence review. If accountant is used, time frame may vary depending on accountant’s time frame.

Time from completion of documents/filing to selling: no wait.

Attorney’s fees not including accounting fees: $10,000.00 to $25,000.00 depending on complexity.

Certain California connected companies may use an exemption from registration for offers and sales of securities in an amount of up to $5 million, which satisfies the conditions of California law. Sales must be to "qualified purchasers", which are similar to Accredited Investors. Solicitation prior to sale is generally permitted.

NOT INTENDED AS LEGAL ADVICE - CONSULT WITH A QUALIFIED ATTORNEY BEFORE RELYING ON THIS INFORMATION