Anyone who has ever started a business knows that “Cash is King,” during the early stages of a business. Those who are not fortunate enough to have the needed cash sitting in a bank account also know that raising funds from investors can be legally complex and subject to substantial regulatory compliance requirements. As a result, many entrepreneurs either skip the third -party equity option, or worse, blunder into this legal minefield with their eyes closed and their fingers crossed.

In April 2012, Congress passed the Jumpstart Our Business Startups Act (JOBS Act). Section 201(a)(1) of the JOBS Act directed the SEC to remove the prohibition on general solicitation or general advertising for In April 2012, Congress passed the Jumpstart Our Business Startups Act (JOBS Act). Section 201(a)(1) of the JOBS Act directed the SEC to remove the prohibition on general solicitation or general advertising for securities offerings relying on Rule 506 of the Securities Act of 1933 (a rule that is relied upon by many companies engaged in “private placements” of their securities) provided that sales are limited to accredited investors (defined as relatively sophisticated or high net worth individuals) and an issuer takes reasonable steps to verify that all purchasers of the securities are accredited investors.

The SEC has now taken steps to implement the removal of the general advertising restriction for private placements. You can read the SEC’s Fact Sheet by clicking this link.

Even with the new rules, the offering of securities to the public remains an extremely technical undertaking. Translation: don’t try this by yourself — get good legal and accounting help before you decide to sell shares in your company.