Securities and Investors
When your company wants to raise funds by selling securities to passive investors who rely on you to run the business, it is very important to be capital compliant, that is, comply with the federal and state securities laws and regulations. Smaller companies do not want to spend the money to be a publicly held and registered company, so they seek private placements using exemptions from certain registration requirements.
If a company uses private placements to seek investors, the company must be careful to not publicly solicit investors unless the company meets the requirements allowing it to do so. Depending on the amount sought in seeking the investment, different rules apply.
Failure to comply with federal and state securities laws may make the violator subject to civil and criminal liability, but also may allow the investor to force the company to refund the investment.
There are restrictions in Colorado on companies paying agents to find investors.
Furthermore, sometimes selling equity in your startup company may not be as attractive to investors as a revenue participation participation agreement.
The best time to consider how to be attractive to investors may be when you are forming the business, so substantial revisions to your bylaws or operating agreement won't be necessary later when you are ready to seek investors.
The Wiemerslage Law Offices is happy to advise and assist you in the formation of your company and helping you comply with the federal and state securities laws.
