Legal Considerations For Raising Capital
By Henry J. Fasthoff, IV, Fri Dec 9th

NOTE: THIS IS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY. IT ISNOT INTENDED TO BE CONSTRUED AS LEGAL ADVICE.

There are numerous legal considerations every entrepreneur mustface when starting a new business, and raising startup capitalis one that can be fraught with danger. Hiring a qualifiedsecurities attorney is not a luxury; it’s a necessity forbusinesses seeking to raise capital from third parties. Some ofthe key general considerations are:

• Properly organizing the company as business entity under statelaw;

• Ensuring the company has issued enough authorized shares ofstock of the same type that will be offered to investors;

• Make sure that any existing and potential legal problems areresolved before issuing stock to investors;

• Have an experienced attorney examine the federalsecurities laws, as well as the laws of any state inwhich stock may be offered to prospective investors, to makesure the company and its investment offer complies with thoselaws;

• Have your attorney explain in writing the potential personalliabilities of the company’s officers and directors if thecompany violates any federal or state laws in raisingcapital.

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Potential penalties can be very serious, ranging fromcivil fines to jail time;

• Make sure that your written investment prospectus contains allrequired state and federal disclosure language in theappropriate places;

• Your attorney should review the business plan and financialstatements for possible untrue and/or misleading statements; and

• Obtain a written opinion from your attorney whether yourparticular investment opportunity is required to be registeredwith the appropriate regulatory agencies.

About the author:Mr. Fasthoff is a commercial litigation attorney by day, and anentrepreneur in the marketing field by night. He representscorporate clients and individuals in the fields of commerciallitigation; entertainment litigation; intellectual propertylitigation; arts law; technology law; and a wide variety ofother business litigation matters.