The offer and sale of stock are subject to Federal and state securities laws, and it is advisable to engage an attorney to ensure that your offering complies with those laws. This article provides some practical guidelines for a private stock offering. Securities Act, Section 5. The Securities Act also provides that the foregoing restriction is not applicable to transactions by persons other than an issuer, underwriter, or dealer, nor to transactions by an issuer not involving a public offering. These laws have the effect generally of requiring a company to register its stock or other securities with the Securities and Exchange Commission prior to offer or sale in interstate commerce unless the transaction or securities themselves are exempt from the registration requirement.
Most states have a similar requirement.
Such a public offering would be made by means of a registration statement and prospectus filed with and reviewed by the Securities and Exchange Commission. Registration is generally a lengthy and expensive undertaking. Offers and sales not involving a public offering are exempt from registration under Federal securities laws, and most states have comparable exemptions. Case law and rulings under Federal securities laws provide some guidance as to what specific transactions may constitute private placements. Although Rule 504 may seem attractive because of these three items, its major drawback is that some states do not have a comparable rule.