Your Business Deserves To Thrive

Hidden Gotchas in Bringing in Investors

On Behalf of | Jun 9, 2017 | Business Management

R. Shawn McBride recently spoke about bringing in new investors and some of the risk involved.

Hey, folks. Shawn here with you. Want to talk to you about something very serious. I’m gonna talk to you about the hidden gotchas of bringing in new investors. Alright, a lot of us are all excited about bringing in new investors and growing our business, and the opportunities that provide. And it’s a wonderful thing to be able to bring in new investors, do more, grow the business.

But there’s a hidden gotcha out there, and it’s securities laws. And many small businesses or medium-sized businesses, privately held companies, don’t think about this. They think the securities laws applies to the Fortune 500, to the guys on Wall Street, to the really big companies. But the way the laws are written is, they regulate all offerings of securities. Now, the good thing for most small business is there are exemptions available.

We’ve got two levels of regulations. We’ve got federal and state, and they don’t necessarily align in all cases. But there are usually exemptions made for certain types of offerings. But they are conditional exemptions. In order to get the exemption, you have to comply with certain conditions. And what we find is a lot of times people sell securities in small, smaller, and medium-sized private businesses. They don’t stop and think about this. So this is why you want to get your attorney interested sooner than later. You want to get them involved to make sure that you’re laying the foundation correctly, that you’re going to hit an exemption.

And even with the exemption, there are still some good steps to be taking. You might have an exempt offering, but you may still want to notify people, have certain paperwork and documentation in place that confirms you have the exemption, and protects you in case of a fraud lawsuit or other exposure to liability.

So this is not something to play around with. If you’re thinking about bringing new owners in your company, even one or two new owners in a small-scale deal, you’ll want to make sure you get it right, because this is a way out, you know. Every lawyer has to do what’s best for their client, which means if there’s a problem down the road, that person who’s your friend and who’s your investor now, may be your enemy. And their lawyer is gonna go after every avenue of attack they can find, including these loopholes. So we want to get ahead of these issues before we get behind them, and we want to make sure we do things right.

So, if this is something you’re dealing with, check out our blog, There’s a blog there. There’s a lot of content on there. McBride for Business has some other general management input and advice for you. The McBride for Business YouTube channel, great place to go get more information, and of course Like the R. Shawn McBride public page on Facebook, where you can get more videos like this. And I want to help you. I want to know what problems you’re dealing with, what we can do. If I can help you one on one, reach out. Of course, I speak to groups and organizations, so if that’s something of assistance to you, let us know. Reach out. R. Shawn McBride, 214-418-0258. And I will chat with all of you very soon.

Each case is unique.  Past results do not guarantee future outcomes. This posting is intended to be a tool to familiarize readers with some of the issues discussed herein.  This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique.  Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. FreeImages.comphotographer Milda K.


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