PrintWhen raising money for a business, a variety of laws can be applicable. Here is a listing of some of the key laws:
- Federal Securities Laws. Whenever you sell stock in a company, you are selling a security. The federal government, through the SEC, regulates the sale of securities. In particular, there is an extensive set of laws under the Securities Act of 1933. If you do things properly, you might be able to fall within an exemption for "private placements," but this is a tricky area and you need advice from an experienced attorney.
- State Securities Laws. Every state also has a set of securities laws designed to protect investors. Thus, if you plan to offer stock in your company to people in various states, you'll need to comply with the securities laws of each of those states.
- Anti-Fraud Laws. When you sell stock or a security to investors, the company is obligated to make all material information available to the investors, and not fail to disclose any material information. These anti-fraud laws are designed to protect investors from being defrauded.
- Usury Laws. If you are borrowing money, your company may be subject to usury statutes, which limit the amount of interest that can be charged.
- State Corporate Laws. Depending on the type of transaction involved, you will need to comply with the corporate laws of the state where your corporation was incorporated. This will mean that you may have to file documents with state authorities, hold a Board and/or shareholder meeting, and take other appropriate steps.
If you decide to raise money by selling stock, it might be helpful to get the AllBusiness.com form Checklist for Issuing Stock, as well as a sample form, in Microsoft Word format, for a Common Stock certificate for a privately held company.
