When a company is looking to raise funds without an initial public offering, a private placement memorandum (PPM) is one of the best ways to raise capital. A company must have the consent of the Securities Exchange Commission (SEC) before this can be done, and will need an information memorandum along with the PPM. Because of the complexity of SEC rules and documentation, it is highly advised to seek a knowledgeable business attorney to help throughout this process.

PPMs are a great sales tool to attract investors, which are also known as subscribers. This document shows that the company directors and officers are serious about their company, have the professionalism to succeed in their particular industry, and are committed to having good products, no matter what sector they are in. The content should be focused on information that allows the investor to make an informed investment decision. Some of the information is required by law, and this is where the business attorney provides valuable insight.

The length of a PPM will be greatly influenced by the caliber of angel investors sought and the amount of capital needed. All PPMs should be very polished, professional documents. The company must disclose all material and relevant facts. No half truths, omissions, or false statements of facts are tolerated. Otherwise, making material misstatements can lead to a securities fraud claim that can affect the company as well as the company’s directors and officers. The SEC can also levy civil and criminal penalties for securities fraud. Thus, taking the time to create and thoroughly review the PPM with a business lawyer’s guidance is well worth the effort and money.

A PPM has numerous technical sections. This includes:
• Summary of Offering Terms: Usually laid out via a term sheet
• Issuer Description: Describes the company and its structure, a short overview, a cap table and context of the offering
• Business plan: Contains information on the company’s position in the market, its unique value proposition and products, as well as the sales and marketing plan, financials, intended use of proceeds, and management
• Risk factors: Details potential and actual risks that could affect the investor; cautionary language should also be included about investment risks in general with unregistered securities; and conflicts of interest should also be described
• Supplemental information: Any additional information should be included that is critical for the investor to make an informed decision
• Subscription procedures: Describes the steps for investors to participate in the offering

Having a trusted business attorney to create, review, and file the PPM allows a business to focus on its daily operations and long-term plan. Business owners can have peace of mind that all the paperwork is done in a thorough way to minimize issues and attract key investors.

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

Buy-Sell agreements are critical parts of a business’ foundation. This type of an agreement is a contract between the business partners that needs to be defined at the start of any business operations or when any new partners are added to the company. An experienced business attorney can help to create and review the buy/sell agreement for its legality, fairness, and to make sure it accounts for any unforeseen events.

The biggest obstacles most companies deal with, and nobody likes to think about them, relate to what happens if a partner should have a serious accident or illness that leaves him or her disabled, dies unexpectedly, withdraws from the partnership, or retires. A company can falter when it has a partner leave, so spending adequate time up front to create a solid buy-sell agreement (also known as, “Buy and Sell Agreement” or “Buyout Agreement”) will make sure the partnership ends in a way that sustains the business. The specifics should outline who is eligible to buy a leaving partner’s share and what the fair price is. It can also establish a buyback option. This helps to protect the remaining partners to have an appropriate new partner/owner come in and a fair price for his/her shares of the business.

Of special note in California, business partners are subject to certain property laws when they pass away. When the business partner dies, the company becomes business partners with the remaining spouse or heirs. As is often the case, these individuals might not have a clue about the business nor be interested in being involved. What they will be interested in is money. They will want payment for their loved one’s portion of the business or stock shares.

This is where setting a fair price up front or establishing a proper evaluation method comes into play. With a trusted business lawyer and a certified public accountant, a fair price can be derived from the various calculations that are typically used. These include:
– Multiple book of value: Accounts for tangible and intangible assets such as brand and trade names, copyrights, and patents
– Appraisal: Before a transfer of ownership, an experienced business appraiser will set the business price
– Book value: Price is based on assets minus liabilities from the most recent fiscal year balance sheet
– Capitalization of earnings: Value is based on past profits
– Fixed price: Current partners agree on the business price and list that value in the buy/sell agreement

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