Do you know the specific forms required to be filed in an intrastate offering exemption?
A: Since it varies by state jurisdiction, I do not have specific info for NJ. You will have to contatct the NJ Bureau of Securities.
Here is my idea boiled down:
- I want to start an investment real estate company (likely a C Corporation)
- Because I do not have massive savings to put toward an investment property, I would need to raise money to use as a down payment on a loan.
- The money raised from investors would be considered the contributed capital of the company
- The investors would therefore receive shares in the company
How would you recommend doing this with the least possible headaches and the best possible outcomes? (If at all possible.)
A: I think that a Reg. A filing is a preferable method. There is, however, no easy way to create a securities investment vehicle. The more registration hoops you jump through, the less your limitations on the selection/accreditation of investors -- and visa-versa.
Once the JOBS Act is finalized, the idea is that equity crowdfunding will be legal for ANYONE and not just accredited investors. I realize that changes take years in the government and I would like to work within the current boundaries of the
law to launch my business.
Also, what type of business formation would you recommend and why? I'm leaning toward a C Corporation over an LLC because I want the investors to have as little headache as possible.
A: A C Corporation is the best possible organization for investment purposes. It permits you to issue share certificates, and if the business gets large enough, then it is easy to go public without changing form.
I feel that if their investment in my company resembles that of a stock on the stock exchange, it would be simpler for them. Why? Because they only have tax responsibilities when they sell the shares or when my company sells the property and dissolves. Under an LLC they would have tax responsibilities yearly through pass-through rules. What are your thoughts?
A: Agree in full -- for the reasons stated above.
Hope this helps.