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Exempt Offerings 

When you see the term exempt being used when raising capital, the context is legal exceptions to the Securities Act of 1933. The Securities Act of 1933 is a federal law passed by Congress that specifies how all companies can raise money from the public. However, Congress found that the complexity and cost associated with complying with the Act shut out small business and start-ups. To provide a remedy Congress created exemptions to the Act of 1933. These exemptions made it more affordable for individuals and small companies to raise capital as long as they meet the criteria outlined in the exemption. No person or company can take any investor funds unless they do so in compliance with the Securities Act of 1933. Before you accept any money from any investor whether large or small, you need to get a working knowledge of the compliance requirements available under the RegulationD Securities Act of 1933 and choose which of the exemptions to use.

For startups and small Operating businesses, you will typically comply with what is called Regulation D Raising capital using the Reg D exemption will significantly reduce your costs as long as you comply with the criteria set out in the exemption. Regardless whether a start-up or operating company, Regulation D Private Placement Exemptions will be your best and most cost effective option. Broadly speaking, the difference between a Reg D Private Placement and a Reg A public offering is cost and the ability to sell the shares in the over the counter market after the offering. Reg D Private Placement shares are restricted from sale to the general public until after they are registered in a public offering (IPO). Regarding cost, one can raise money in a Reg D. Private Equity Placement relatively inexpensively.

However, the cost of a Reg A Offering will easily be six figures. A Reg A Offering should not be considered unless your company is an operating company, has been in operation for at least 5 to 10 years, and is very profitable earning at least seven figures per year. There are other rules and exceptions besides the Reg D. and Reg A exemption that are worth a mention. Small Corporate Offering Registration also is known as SCOR Offering. A SCOR offering is limited to $1,000,000Keep in mind as we go forward that accounting requirements and listing requirements apply to these offerings. At this point, I want to notate the difference between a private placement memorandum and a security offering. With a private placement memorandum, you are selling securities or bonds to an investor that carry restrictions preventing the investor from reselling their shares. The only way those securities can be sold to the public is if the company at a later date does a public offering. On the other hand, a securities offering such as a Reg A or SCOR Offering does allow the security or bonds to be sold to the public without restrictions. 

Call Mr. Lance Shields at 239-300-9875  /  This email address is being protected from spambots. You need JavaScript enabled to view it.

Shields Capital Partners

3606 Enterprise Avenue

Naples, FL 34104

Hours: (M - F 10:30am - 6:00pm Eastern)


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