Corporations sell stock to raise capital for many reasons – expansion, new technology, and more.  There are federal laws associated with issuing securities that you need to understand before you print out a bunch of stock certificates and hand them over to someone.

Your investors must be given full disclosure of the risk involved in any investment with your company.  You have to register your securities with the federal regulatory body, such as the SEC, and distribute a disclosure statement.

If you mess up with securities, you’re in hot water. Most lawyers don’t want to handle those kinds of cases because strict compliance is mandatory.  There are some exemption laws that help with the issuance of securities, but a securities lawyer can help you tailor your stock so that it follows regulations.

In most instances, when you issue stock to yourself, your family, or a few partners, then securities laws to not apply.  You can sell stock to a small group of people without advertising and take advantage of the private offering exemption.

You still have to limit the number of people who have the opportunity to invest in the stock and the stocks cannot be used for immediate resale to other investors.

If you only offer your stock to residents of one state, then you may not have to worry about federal securities laws, since you can take advantage of the intrastate offering exemption.

Because the government wants small business to grow, the SEC has made it easier for small companies to get exemptions for selling stock.  They developed SEC Rule 504, 505, and 506 to set up the small offerings exemption.

Rule 504 states that you can be exempt if you offer securities of up to $1 million in a 12-month period to any number of investors without providing specific information.

Rule 505 says that you can offer up to $5 million of stock in a 1-year time span, but you can’t use advertising and the investors are limited to a total of 35 non-accredited investors with no limit on accredited investors.