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Selling Stock to Fund Business Startup?

NormNorm subscriber Posts: 3
edited May 2007 in Startup Funding
Hi everyone:
I`m new here.  This looks a very active, informative forum.
I have an idea for an business I want to start in the entertainment industry.  I have done quite a bit of research and have a good amount of experience in the field and I am very, very confident the business would be extremely successful if done right.  I see this as a very exciting opportunity with tremendous potential.
I have been mentally working the idea for several years now.  I`ve pretty much figured out ways to solve all the logistics, but in order to get started--like millions of other startups--I need to find funding.  My question is this: Would it be possible for me to start a corporation and sell private stock? I`m sure it is, of course, but I have these questions:

Once I incorporate, my corporation has stock.  Can I start selling it to investors immediately? Or are there a bunch of legal hurdles to clear first? The corporation will be private, not public.
What all is involved in doing this?
Has anyone done this before? If yes, do you have any advice to offer?
Thanks very much in advance.


  • RetiredMember4RetiredMember4 subscriber Posts: 1
    startupattorney10/8/2008 3:39 PM
  • stonesledgestonesledge subscriber Posts: 608 Silver Level Member
    I have some documentation and resources if you would like me to send them to you. It will help you decide on which avenue to go, the proper steps and forms etc. Pm me and I can send over to you.
  • nakachinakachi subscriber Posts: 0
    Norm,In order to sell stocks of your company, you must first qualify the stockholder. Because you are not on the stock exchange, you can not advertise your stocks with the public. However, friends family acquaintance. People you are familiar or a colleagues can participate in a privately held corporation. Check with your State Department of Corporation. Most Office Depot or OfficeMax has these legal forms that explains the qualification process of a corporation issuing stocks.you may go to entrepreneur.com that`s another source of information.Heraldo
  • robertjrobertj subscriber Posts: 0 Member
    It is not uncommon for a private corporation to acquire capital through the securities. However, there are laws and regulations that one should follow.
    First of all, one should determine the optimum strategy for acquiring the capital.
    My advice is to get advice from someone who is experienced in this area.
    Send me a PM if you want to discuss your specific situation.
  • RaydenRayden subscriber Posts: 2
    You have to comply with the SEC if you want to issue stock, whether that is
    registering the stock or qualifying for an exemption.Lisa, are you in Houston or L.A.?Jimmyhttp://FoundersCafe.comRayden2007-5-22 4:19:40
  • crazydiamondcrazydiamond subscriber Posts: 1
    Ok first off, IANAL (I Am Not A Lawyer), but here`s my two cents.. If your company is going to be a private corporation, you do not need to deal with the SEC or any of the public stock red tape. The catch of this though is that you cannot solicit or make representations on the investment to the public.That means that finding investors has to be on a more or less individual basis (like someone said above: family, friends, acquaintances, coworkers etc.). But you can also approach venture capital groups (one at a time to be safe) to invest in your company. The one thing you have to remember is that you cannot solicit or talk about investing in your corporation to the general public.Try to speak to a corporate finance lawyer about this, because a lot of what is and isn`t soliciting the public is governed by precedents and case law, so it`s frequently open to interpretation.Hope that helps...
  • robertjrobertj subscriber Posts: 0 Member
    Dear crazydiamond,
    I see from your profile that you reside in Canada. I don`t know the rules in Canada, but in the USA - anyone selling a security is subject to SEC regulations!
    Now there are specific conditions by which a company (public or private) can be exempt from the registration requirements (your red tape).
    Although it is done fairly often - it is unwise to simply ignore the requirements even (some may say especially) if you are getting investments from your friends and family.
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