Business owners often seek investment capital to help develop and grow their business. People rendering services expect to be paid for value created. However, paying someone to raise money has serious legal ramifications unless the recipient is properly licensed. Finding a licensed broker/dealer to facilitate a private or public offering for small to medium size companies can be extraordinarily difficult; if not impossible. This is because licensed broker/dealers generally represent companies which are fairly easy to finance. If a broker is unable to secure financing, they don’t earn a commission. As a result, start-up, early-stage and high risk businesses tend to be ignored. Fortunately, there is an exemption under federal law that allows officers and directors of a company to raise money on behalf of their business. There are a few caveats including that such persons may not collect compensation (e.g. a commission) for their capital formation efforts. As well, there are numerous laws relating to private placements and public offerings on a federal and state basis that must be complied with.
We specialize in helping companies go public through a direct public offering, which is an initial public offering without an investment banking firm being involved. Contact us with any questions.
