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Any endeavor to raise capital from the public is regulated by both federal and state securities laws. These laws apply to all investors. The exception is money raised from members of your direct family (father, mother brother sister). You cannot take ANY investor money without complying with both Federal and State laws. These laws are not only confusing but appear to contradict each other. To successfully raise the capital you will need to understand how to raise money in compliance with Federal and State Laws. This is not meant as legal advice but something like a cheat sheet to allow you to form a strategy that has the possibility of success. You need to understand what Federal Securities exemptions to use. How to use the exemptions and what documents you need to produce and provide to investors.

The Securities & Exchange Act of 1933 was passed by Congress to regulate the soliciting and taking of money from investors. However, compliance with the law was so difficult and expensive that individuals and small companies could not afford to raise capital. To remedy this problem, Congress amended the law and passed what is known as Regulation D. In Reg D, Congress said, if you comply with the requirements listed in Regulation D(Reg D) you will be “exempted” from the much more complex and expensive requirements that the SEC Act of 1933 imposed. The key to qualifying for this exemption is you must comply with all facets of Reg D. If you violate any of the Reg D requirements, you lose the exemption and thus you are in violation of Federal Securities Law. 

To begin. Regulation D requires that you must provide each investor with “All Material Information” regarding investing in your company. The information contained within the Placement Memorandum (.a.k.a. PPM) is the document you give each investor to comply with this Reg D requirement. A business plan is not a PPM, however, the information included in the business plan is included in the PPM. In the case of preparing your own PPM; you would typically copy your business plan into the PPM.

Are PPM’s Industry specific – No

Each PPM will include a one-line description of what your business does or will do. Examples: We manufacture widgets. We buy and rehab real estate for resale at a profit. Etc. Note: You will be providing much more industry-specific information within your business plan that you will be including in the PPM.

Regulation D also defines investor’s sophistication standards and the standards you must follow to solicit investors. For most, this is the really difficult part. We have a great deal of free information on the website to help you. In addition, we also will assist our clients in raising capital. Talk to us if you are interested in our help

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