Raising Capital for Small Business by Selling Stock

One proven way to increase capital is to sell shares. Selling shares to the public is usually not a small business choice, and one way to raise money from investors while keeping your partner in control is to sell shares in a private company. Before you can sell stock shares, you need to get board approval and possibly shareholder approval. You need to set the share price and make a share sale agreement.

Of course, to consider selling stock, you need a company that shows signs of potential growth and profitability. Your business plan, financial estimates, and marketing plan will be the most important factor in convincing someone to buy shares of your company. Prospective shareholders need to be shown how their money will be spent and what you have envisaged as a type of business growth.

For personal securities issuance, you can offer a private placement that does not need to be registered with the Securities and Exchange Commission (SEC). There are some exceptions that allow a small businessman to make a security deposit without the need for a long and somewhat complicated registration for GS. However, the proposal still has to comply with state and federal law. It will usually have to be submitted to state security administrators.

While selling a stock can give you much-needed capital, it also means giving up some control. Shareholders will have the right to say when electing directors of the corporation. They can also view corporate books and records and vote on key corporate decisions. Carefully review the terms and conditions of the share sale agreement with your attorney and make sure you understand all of the company’s rights and obligations. It is necessary to understand exactly what the securities offering will consist of and whether it will comply with the securities laws. The advantage of relinquishing some control over the sale of shares is that you will be able to harness the knowledge and business experience that major shareholders can bring to the company.

You probably know most of your shareholders when selling private equity to start a small business. Maintaining a good relationship with shareholders is important. They will assist and keep you up to date on business activities and will influence clients to buy more shares when the offer is on.

When a firm wishes to raise funds by selling securities, a full disclosure document is usually required. A Private Placement Memorandum (PPM) is used to disclose such company information. Also known as the Motion, this is an important document for small businesses and should be prepared with the assistance of an experienced security solicitor.