What Exactly are “Securities Laws”?
By JJ Thomas • Dec 10th, 2008 • Category: Legal & TaxesCourtesy of Startup Company Lawyer:
If you are starting a business or have already started one and ready to raise some capital , inevitably you have been introduced to the legal maze of what is called “securities laws.” These laws, generally speaking, govern the raising of money by selling ownership, whether through stock or otherwise, in a company. The laws are meant to protect investors and help ensure an even playing field for those raising money and those investing money.
Companies selling common stock, preferred stock or issuing options or warrants are issuing “securities.” The Securities Act of 1933 generally requires companies selling securities to give investors full disclosure of all material facts that investors would find important in making an investment decision. The Act also requires companies to file a registration statement with the SEC that includes information for investors, unless the security or the type of transaction is exempt from registration.
Even if a securities offering is exempt from federal registration requirements, the company must also comply with securities laws in each state where securities are offered. States may impose their own registration or qualification requirements that must be complied with unless an exemption is available.
JJ Thomas is the founder and chief promoter and contributor for BirminghamSmallBusiness.com. JJ has a passion for entrepreneurship and enjoys helping fellow aspiring and practicing entrepreneurs. JJ has also founded other related business ventures, such as Entrevisor (providing entrepreneur advisory services) LOLO Rewards (coalition loyalty and rewards program for locally owned, independent businesses), The Entrecyclopedia (the Entrepreneur's Encyclopedia of useful information) and EntrePulse (a weekly roundup of practical info for aspiring and entrepreneurs).
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