Private Placement of Securities Summary

Think Legal, P.C., uses a private placement of securities to orchestrate raising capital is an essential part of starting or growing a business. Any form of equity, including shares of preferred stock, common stock, LLC membership interests, or limited partnership interests, are sold via the documents for a private placement of securities. Think Legal, P.C., drafts and, when necessary, files with the United States Securities and Exchange Commission, the California Department of Business Oversight, or the agencies of other states regulating the sale of securities. As any form of equity may be sold, a private placement of securities Think Legal, P.C., prepares may also sell debt instruments, including convertible notes, non-convertible promissory notes, and other evidence of indebtedness.
 
A bank loan, including a loan underwritten by the United States Small business Administration, may be more challenging to secure because business loans and lines of credit are tied to the personal credit scores of the business promoters, founders, or shareholders, and almost always need those promoters, founders, and shareholders to each provide a personal guaranty of the performance of the business for the loan or line of credit.
 
Financing from a private placement of securities Think Legal, P.C., prepares will not depend upon the personal credit of promoters, founders, and shareholders, and no form of personal guaranty. But, finding investors with the capital to invest in an equity or debt offering requires connections to such investors, and investors may have their criteria for funding. Investors generally consider having a healthy business plan, strong business financials, demonstrated ownership of intellectual property, and a proven track record in business are all factors when evaluating an investment opportunity.

Private Placement of Securities Details

Regulation D Private Placement

Private placement of securities Think Legal, P.C. prepares under Regulation D is the most common way for entrepreneurs to raise capital from the sale of securities. A regulation D private placement of securities allows a corporation, LLC, or limited partnership to offer equity or debt securities for sale without adhering to the complicated and expensive registration requirements of the Securities Act of 1933.

Equity Offering

Equity instruments include shares of stock in corporations or s-corporations, LLC membership interests, or limited partnership interests. The selling of an equity instrument through a private placement of securities Think Legal, P.C. prepares transfers partial ownership in the business to the investor who buys the equity instrument. The purchasers of equity instruments sold through a private placement of securities Think Legal, P.C., prepares are interested in obtaining these ownership interests expecting profits will be distributed pro-rata based upon ownership or hoping the business will grow, increasing the value of the securities purchased. Investors may also expect to receive the right to vote on business matters or receive financial statements and other reports of business disposition.

Debt Offering

Debt instruments include bonds, debentures, and other obligations of a business. Debt instruments sold through a private placement of securities San Diego Corporate Law prepares loans to the company from the investor instrument from the business. As with any loan, the investors who loan money to a business by buying debt instruments through a private placement of securities San Diego Corporate Law prepares will expect an offering to specify the interest rate to be paid on the instrument, the dates on which interest will be paid, and when the principal will be repaid to the investor by the business. Issuing debt instruments through a private placement of securities San Diego Corporate Law prepares can be very difficult for start-up businesses or businesses with less than excellent financial prospects and history because early-stage investors may be more interested in acquiring an equity position in preference from a debt instrument. Convertible notes, which start as debt instruments but, upon certain trigger events, convert into equity ownership are an attractive option for start-ups and investors.

Private Placement Memorandum

To meet the requirement of Regulation D, an issuer may have to make extensive disclosures regarding the offering, including disclosure of the nature, character, and risks of investing in the offering. This disclosure document is called a private placement memorandum, offering memorandum, offering circular, or PPM. The issuer provides information disclosure for distribution to prospective investors. A private placement memorandum Think Legal, P.C., is not a sales pitch promoting the private placement of securities but is a document outlining the most foreseeable investment risks of the private placement of securities. While many start-up companies view the use of a private placement memorandum as a hindrance to fundraising because of the cost and time associated with the preparation and distribution of a private placement memorandum, the risk disclosure aspect of the private placement memorandum Think Legal, P.C., prepares significantly protects the start-up company.

Private placements of securities are exempt from the registration provisions of the Securities Act of 1933; however, the anti-fraud provisions of the Securities Act of 1933 are never exempted. Therefore, a private placement memorandum should never be materially misleading, as the issuer may be subject to monetary penalties and even imprisonment.

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