Retaining Legal Counsel is Critical When a Business Wants to Raise Capital

Business owners work diligently to build value in their company and to attract consumers and investors. Many plan for the day when they can go public and have an initial public offering (IPO). With recent technology companies raising some serious cash, it’s no wonder that many businesses are contemplating if they can mimic LinkedIn and Pandora’s IPO successes. To that end, whether your company is in the tech sector or a different industry, you’ll want to get a qualified business attorney on your side.

When a company files for SEC registration, the information becomes public record. As such, a knowledgeable business attorney will ensure that the registration and documents meet SEC requirements and protect your corporate image. Preparing for an IPO is tedious work, and unless your company can get an SEC exemption, the paperwork is best drafted and reviewed by counsel.

For those companies who want to pursue other methods of raising capital and are eligible for one of the SEC exemptions, legal counsel remains critical. For example, the Rule 504 exemption of Regulation D allows a company to avoid SEC registration if they: sell up to $1 million in securities in any given year timeframe privately; do not have to file reports per the Securities Exchange Act of 1934; and, it is not a blank check company. The Rule 504 exemption lets a company avoid SEC registration and some report filing, but a company will still need to file Form D after the first securities are sold in a private sale. An experienced business attorney will help a client make sure the documents for the private sale and Form D are completed thoroughly without erroneous statements and violations of antifraud provisions.

This also applies to Rule 505, Regulation D of the SEC exemptions. Rule 505 allows up to $5 million in securities offerings and has different investor requirements, but Form D is still mandated. A business attorney will give a company peace of mind that they are completing investor disclosure documents and Form D efficiently.

Rule 506 exemptions allow a company to raise unlimited monies but all non-accredited investors must be sophisticated investors, unlike the guidelines of Rule 505’s non-accredited investors. Form D is still required.

Overall, a business attorney is well worth the investment to ensure that all the steps are completed with precision. The SEC is not a governmental body anyone wants knocking at the door for failing to comply with their rules and regulations. Retaining legal counsel, whether to raise capital through an IPO or privately, helps a company move forward in the best way possible. Business owners can therefore focus on the aspects they are best at and lessen their stress and potential liability during this critical time.

In California, Los Angeles business attorney Anthony Spotora counsels businesses from sole proprietorships to major international corporations on raising capital and SEC requirements and exemptions. The Law Offices of Spotora & Associates, P.C., has decades of experience with businesses throughout California, the U.S., and abroad.

For more information:
Law Offices of Spotora & Associates, P.C.
1801 Century Park East, 24th Floor
Los Angeles, California 90067-2302

P (310) 556.9641
F (310) 556.9642
Toll Free: (877) 4U-EZ-LEGAL

Anthony Spotora is a Los Angeles entertainment lawyer and Los Angeles business attorney. To learn more, visit

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This entry was posted on Monday, August 15th, 2011 at 11:16 am and is filed under Business & Corporate Law. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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