FAQ’s - Creating Investor Documents

Frequently asked questions and Answers

Why must I create Investor Documents?

The central theme of all Federal and State regulation involves the general concept of providing investors and potential investors with “ ALL MATERIAL INFORMATION” needed to make an informed investment decision. It is your responsibility to provide the investor with this information. The government does not specifically define what you should provide just that any information that is germane to the investor making a decision must be provided.

What are investor documents?

The investor documents are (PPM) Private Placement Memorandum, Subscription Agreement and if you are an LLC an LLC Operating Agreement.

When must the Private Placement Memorandum and Subscription Agreement be given to an investor?

Whenever you solicit and accept investor money a Private Placement Memorandum and Subscription Agreement must be provided before you accept any money.

What is the PPM?

When you solicit money from an investor and you provide them with a document; that document is an “offering document”. The PPM acts as an offering document. The PPM is a combination of general and specific language that explains risk of investing in your project and description of the project.

What is a subscription agreement?

This is a document that is given to the investor that they sign and return to you with their check. Among what the Subscription Agreement represents is that the investor received a PPM.

Are there different PPM’s for different industries?

No, in each PPM there is a space for a one or two line description of the business. Such as “ The business is the retail manufacturing and sale of widgets”. PPM’s are not industry specific.

Is the business plan an offering document?

No, in fact if you create your own PPM you would copy and paste your business plan into the PPM template.

Where can I get a PPM template?

We have a template available on our website that is legend for all states. We also include the Subscription Agreement. Note that some templates are not legend for use in all states and many charge extra for being legend in all states. <<<Link to PPM Template>>>

Can I prepare my own PPM / Subscription Agreement and LLC Operating Agreement?

Yes, in our documents. We offer the templates, filled out sample documents for examples and fairly straight forward simple instructions.

What is the key element in preparing a PPM – Private Placement Memorandum?

The key is to include “all material information” that an investor requires to make an informed decision. To omit critical information may result in your being required to return the investor money. This is the primary reason we suggest you have someone experienced critique your business plan for any elements that either are missing or should be removed. It is a service we perform.

Should I have an attorney create my PPM?

That is a difficult question to answer. Generally, a securities attorney will charge $10,000 - $20,000 to create a PPM and Subscription Agreement. Many people find this cost beyond what they can afford. Your best answer may be to prepare the documents yourself and at some point submit them to an attorney for review This should dramatically reduce your legal costs.

Why must the Private Placement Memorandum and Subscription Agreement be given to investors?

Putting aside the Reg D requirements. The principal advantage is that you have proof that you made “full disclosure” to the investor. The onus of proof falls on you to prove you provided the investor with full and fair disclosure. The signed subscription agreement by the investor proves he received the Private Placement Memorandum. Should your project not succeed that becomes your shield for lawsuits.

Note: There is additional free information regarding this subject on our website. For those with serious intentions to move forward in raising capital for your project you may wish to review the audio seminars we have available. The seminars are of a much higher and sophisticated level of explanation.

Copyright 2011- Lance Shields-All Rights Reserved-About the author  >>>click here<<<