Am I breaking any securities laws if my investment group moves forward with a new business model?
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Am I breaking any securities laws if my investment group moves forward with a new business model?
In a nut shell, members pay a membership fee and that fee is directly used to fund small businesses of their interest pooled together with other members using their fee to create a large investment in a company. The funded company gives up “X” equity stake for the investment and the group of members split that ownership evenly and we move on to the next opportunity/investment in a company.
Asked on January 16, 2012 under Business Law, Texas
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
In many states in this county, your busienss model may be in violation with state securities laws by making a public offering of a "security' without the required registrations and approvals under requirements under your state's Department of Corporations.
If the business opportunity is given to people that you actually know, then I do not presently see a security violation assuming the venture is adequately capitalized. However, when the type of investment is offered to the public at large which yours seems to possibly be, there very well could be security requirements that you need to comply with before there is a public offering.
I recommend that you consult with a business attorney before you move forward on any public offering as to your new business model.
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