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I am raising money for a business venture which will include…

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I am raising money for...
I am raising money for a business venture which will include an equity stake. When I am distributing an investor prospectus, what disclaimers or rules must I follow? Anything with the SEC? This is not a big business, but... Thank you!
Submitted: 6 months ago.Category: Business Law
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12/23/2017
Business Lawyer: Richard - Bizlaw, Attorney replied 6 months ago
Richard - Bizlaw
Category: Business Law
Satisfied Customers: 10,824
Experience: 30 years of corporate, litigation and international law
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Hello, my name is ***** ***** I will try to help you. Please remember I just report or interpret the law, so the outcome may not be what you hoped for.

What you call a prospectus is generally known as a private placement memorandum. It is used when issuing securities such as stock pursuant to what is known as the limited offering exemption under the Securities Act of 1933. The memorandum is designed to provide information to a potential investor about the business, the industry in which it operates and the risk factors facing the business. The goal is to provide the potential investor with all the information that would be considered material in making an investment. It also serves as a shield to protect the founders such as yourself from being sued if the business fails or does not perform as hoped as the memorandum should have disclosed the potential risk of complete failure or failure to meet expectations.

Under Regulation D there is a safe harbor the SEC offers that allows you to be sure you qualify for the limited offering exemption. However, you can just rely on the exemption under 4(2) of the Securities Act without using Regulation D. Most people try to comply with Regulation D. Without the exemption provided by regulation D and section 4(2) you would have to file a full blown securities prospectus in order to sell shares which would be highly expensive.

Here is a link that gives useful information about the purpose of the private placement memorandum and what it should include.

https://www.businessattorneyinaustin.com/checklist-requirements-private-placement-memorandum-ppm/

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