Many entrepreneurs don’t realize that every offer and sale of a security is required to either be (a) registered with the Securities and Exchange Commission (SEC) or (b) subject to an exemption from registration under the Securities Act of 1933, as amended. That requirement applies to the sale of securities to multiple high net worth individuals, the sale of a security to one person in a private transaction, the sale of a security to a family member and all offers and sales of securities of public and private companies, including organizations with only two or three persons. Notwithstanding the requirements described above, a significant number of offers and sales may be exempt from registration under the Securities Act. Instead of registering the initial offer and sale of securities under the Securities Act, a company can rely on an exemption from registration to avoid such registration requirements.
Offerings that are exempt from provisions of the federal securities laws may still be subject to the notice and registration requirements of various state laws. You should make sure to check with the appropriate state securities regulators before proceeding with your company’s offering.
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