If you are considering approaching investors for a private stock offering, there may be limits on the number of private investors you can work with. Be sure you are aware of the difference between a public and private stock offering, and be sure you appreciate the risks involved with private stock offerings by seeking legal assistance.
When a business wants to sell stocks, it can do so with either a public stock offering or a private stock offering. A public stock offering involves trading stocks openly on a stock exchange, whereas a private offering involves selling stocks to a small number of selected private investors. Generally, in order to purchase stocks through a private stock offering, investors must be accredited as having a certain amount of assets as well as experience with and knowledge of trading stocks – these private investors are usually large organizations, such as banks and companies. There is no limit to the number of accredited private investors that you can approach to buy stocks through a private stock offering. However, in some instances, unaccredited investors are also allowed to acquire stocks through a private stock offering; the number of unaccredited investors to whom an issuer can sell is limited in order to maintain certain regulatory exemptions.
A private stock offering is a complex matter that contains several advantages and disadvantages. For instance, a private offering does not require registering with the Securities and Exchange Commission (SEC), and details of business records are not made public. However, it does generally increase the amount of paperwork involved, as well as increasing the risk of business malpractice lawsuits. Therefore, you must seek the advice of a qualified securities attorney when contemplating a public stock offering for your business. If considering a private stock offering, consult an experienced attorney for assistance.