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Legal Considerations For Raising Capital

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Legal Considerations For Raising Capital Powered By Docstoc
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                                             Legal Considerations for Raising Capital
                                                          By Henry J. Fasthoff, IV



    Legal Considerations for Raising Capital by Henry J. Fasthoff, IV


NOTE: THIS IS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY. IT IS NOT INTENDED TO
BE CONSTRUED AS LEGAL ADVICE.

There are numerous legal considerations every entrepreneur must face when starting a new business,
and raising startup capital is one that can be fraught with danger. Hiring a qualified securities attorney
is not a luxury; it’s a necessity for businesses seeking to raise capital from third parties. Some of the
key general considerations are:

• Properly organizing the company as business entity under state law;

• Ensuring the company has issued enough authorized shares of stock of the same type that will be
offered to investors;

• Make sure that any existing and potential legal problems are resolved before issuing stock to
investors;

• Have an experienced securities attorney examine the federal securities laws, as well as the securities
laws of any state in which stock may be offered to prospective investors, to make sure the company
and its investment offer complies with those laws;

• Have your attorney explain in writing the potential personal liabilities of the company’s officers and
directors if the company violates any federal or state securities laws in raising capital. Potential
penalties can be very serious, ranging from civil fines to jail time;

• Make sure that your written investment prospectus contains all required state and federal disclosure
language in the appropriate places;

• Your attorney should review the business plan and financial statements for possible untrue and/or
misleading statements; and


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• Obtain a written opinion from your attorney whether your particular investment opportunity is required
to be registered with the appropriate regulatory agencies.




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                                           Raising Capital To Start Your Company
                                                             By Jason Wilson



The first capital influx into a start-up enterprise provides the thrust to bring forth the company founder's
vision into solid results.

 The incongruous fact is that, even though there are many capital providers, at times it’s a rare and
hard to find item, and even more so for an unproven start up company.

 Raising capital is very important to conceive the start-up’s operations and to arrive at the point where
outside capital can see and feel the progress of the start-up company, realizing the personal financial
dangers the company insiders took in getting there.

 If the start up company’s directors can't provide the required personal assets to devote to the
company, capital raising becomes a rocky road to follow.

 No doubt it’s hard to place ones assets into a new and untested endeavor, although it's regarded as a
major step – a rite of passage of sorts - that will convey your belief and dedication to the triumph of
your venture. Nothing ventured, nothing gained, sink or swim.

 Being in the midst of the creation of your business is a potent inspiration that will amaze you with its
force…. Why? Because it’s your baby, your creation!

 Nevertheless, this is the real question: How do you go about getting the seed money to gear-up your
startup until it can raise outside capital? How do you get past the “Hey, great idea!” to possibly raising
adequate capital to start operations?

Here are some excellent ways to raise capital:

• Home equity, remove the value in your home and stick into your business.

 • Approach family and friends, don't overlook this primary resource. Make sure to get all your
agreements in writing and do your best to uphold your end. IMPORTANT: Make sure you ask for loans,
don’t give up equity. Believe me, you don't want your mother telling you how to run your company!

 • Use your credit cards to get all the capital you can. Making the minimum payment will allow you to
raise a good amount of capital, a deal when you need it most.

 • Sell your possessions. If you have a summer home, or a vintage car, sell them and use the capital to
help your start up company.

• Do you have whole life insurance? Borrow from it and put the capital to work for your company.

 • What about a 401K? This option applies only if you are working and running your star-up company
part time.

All the items mentioned will stretch your resources while raising capital for your start up company, your


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vision. Your attitude and commitment to raise capital for your startup company will not only inspire you,
but will put fire in the belly of all interested investors and they will join you in raising capital for your
startup enterprise.

 It may be a long, drawn out process to reach the end result. It takes determination, a sound business
plan, and a convincing management team if you want to get venture capitalists to even consider your
company as a good potential investment.

For information on going public public without a public shell or a reverse merger, please contact Tiber
Creek Corporation at http://www.tcc5.com/




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