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Home 🌿 Marijuana Business News 🌿 Did You Violate Federal & State Law When You Raised Capital? 🌿Did You Violate Federal & State Law When You Raised Capital?
No your not a white collar criminal, but what many founders do not know is that they may have violated federal and state securities laws through their efforts to raise capital.
Most founders obtain initial financing for their startups by tapping their savings, incurring debt, asking their friends and family for money and approaching professional investors.
Here’s the issue: Every offering of securities has to be either (1) registered with the Securities and Exchange Commission or (2) qualify under one of the applicable exemptions from registration.
Typically, a friends and family round of financing is done by (1) issuing stock to investors in exchange for their money or (2) issuing a promissory note (e.g., convertible debt). Because the SEC’s definition of what constitutes a security is broad, when you issue stock or an equity interest to your friends or family members in exchange for money, such transaction is likely to be...
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