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Orange County attorney article review: When starting a new business and raising startup capital, there are a few general issues to be aware of. This article touches on some of the key considerations.
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Legal Considerations for Raising Capital
by Henry J Fasthoff
NOTE: THIS IS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY. IT IS NOT INTENDED TO
BE CONSTRUED AS
LEGAL ADVICE.
There are numerous legal considerations every entrepreneur must face when
starting a new business, and raising startup capital is one that can be fraught
with danger. Hiring a qualified
securities attorney is not a luxury; it's a
necessity for businesses seeking to raise capital from third parties. Some of
the key general considerations are:
• Properly organizing the company as business entity under state law;
• Ensuring the company has issued enough authorized shares of stock of the same
type that will be offered to investors;
• Make sure that any existing and potential
legal problems are resolved before
issuing stock to investors;
• Have an experienced
securities attorney examine the federal
securities laws,
as well as the securities laws of any state in which stock may be offered to
prospective investors, to make sure the company and its investment offer
complies with those laws;
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• Have your attorney explain in writing the potential
personal liabilities
of
the company's officers and directors if the company violates any federal or
state securities laws in raising capital. Potential penalties can be very
serious, ranging from civil fines to jail time;
• Make sure that your written investment prospectus contains all required state
and federal disclosure language in the appropriate places;
• Your attorney should review the business plan and financial statements for
possible untrue and/or misleading statements; and
• Obtain a written opinion from your attorney whether your particular investment
opportunity is required to be registered with the appropriate regulatory
agencies.
Mr. Fasthoff is a commercial
litigation attorney by day, and an entrepreneur in
the marketing field by night. He represents corporate clients and individuals in
the fields of commercial litigation; entertainment litigation;
intellectual
property litigation; arts law; technology law; and a wide variety of other
business litigation matters.
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