Knowledge Base

Which exemption rule should I use for a private offering? 504 or 506?

A study done by the SEC revealed that 94% of all Regulation D exemption offerings were done using Rule 506, regardless of the dollar amount being raised. This was published in 2013, so, the numbers have probably changed somewhat; however, we find it fair to assume that in over 90% of the cases Rule 506(b) is most likely the logical choice, since it allows up to 35 non-accredited investors and is fairly inexpensive to conduct. CLICK HERE for more information on Reg D Rule 506(b) & (c).

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What is Regulation D?

“Regulation D” is a federal regulation governed by the SEC. Reg D, as it is known in the capital industry, is part of the Securities Act of 1933, indoctrinated in 1982, that allows companies the ability to raise capital through the sale of equity or debt securities (e.g., private stock shares) without registering the securities with Federal or State governmental agencies. [LEARN MORE]

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What needs to be filed for a Reg D Offering?

You should file your Form D at the SEC (EDGAR) within 15 days after receiving your first investment. Of course, we always try to file ‘before’ approaching investors, which is preferred. The Edgar database allows investors to search for you, in the publicly accessible EDGAR system, when doing their due diligence. Obviously, this adds credibility to your company, and the investment. After you receive your first investment you will also need to file (typically, within 15 days) a “Form D” in the state where you received the capital. Some states have additional forms that need to be filed with the Form D, see our section on BlueSky Filings. The SEC does not charge to file the Form D. Most states charge a fee of between $25 – $1,500.

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What is a PPM?

A PPM is the acronym for ‘Private Placement Memorandum,’ a formal document that discloses certain details about a company, and its management, when raising private capital from investors. The PPM discloses the risks involved to investors, and lays-out the company’s business plan, and other vital information an investor needs to make an informed decision. [learn more]

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What materials will I need to complete my PPM?

Generally you will need a Business Plan, Financial Statement (or balance sheet), Management Bios, Corporate Stock Ledgers, and knowledge of Regulation D.

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How can I buy a Template PPM?

Choose a particular template, for example: “Real Estate Fund PPM for a Limited Liability Company conducting a Reg D 506(b) offering.” Next, click “Add to Cart” and then “Check Out.” You can also check out faster by clicking the PayPal quick checkout button. After your purchase you will then log-in to your account (Click Here) and download your template.

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How can I download my PPM Template?

At the top of any webpage within our site click “My Account” then click “Downloads,” click the corresponding order number and follow the instructions.

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How can I update the Table of Contents in my PPM Template?

To update the Table of Contents, first make sure you have completed each section of the PPM. Next go to the table and highlight the entire table. Right click (in Windows), or click while holding Control (on a Mac), and choose “update field” then choose the item you would like to update, your options should be “update page numbers” and “update entire table.” Click okay and you’re done. It’s that simple.

Note: If you delete sections, or headers from certain sections, the table will not update that section, and may show an error on the table. If this happens simply delete it from the table as you do not need the section you deleted.

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What kinds of businesses are eligible for Regulation D?

Any kind of business qualifies for Reg D. Start ups, Mom & Pop Shops, franchises, any private business, or any publicly traded company. However, to qualify you must conduct your offering according to the rules. Regulation D sets forth those rules.

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Can I use an Executive Summary to develop a PPM?

Yes, but you should provide investors with as much information as possible. Our templates provide the typical sections listed in an executive summary and also include all the general disclosures you’ll need to comply with Regulation D. However, it is ultimately your responsibility to customize your materials, to provide investors with the proper disclosures, which are required by Reg D.

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How do I file Form D?

As of March 16, 2009 all filings with regard to Form D must be done electronically through the SEC’s EDGAR system. To file you must first be given a CIK (username) and password. You can obtain these items from the SEC. CLICK HERE to get started! If you need assistance with filings we can help. We’ve filed hundreds of Reg D Offerings.

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Do I need an attorney to do a Reg D Offering?

No, but we always recommend having an attorney complete a final review before sending to investors. If you don’t use an attorney and an investor files suit against you, you run the risk of having to return all the investment monies, fines, and possible bans from doing Reg D Offerings in the future. It’s always best to hire a competent attorney; with that said, if you can’t afford an attorney, or if they won’t return your phone calls, it is good to know that thousands of business owners have completed this process without an attorney.

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How do I choose which Reg D rule to use?

To rely on a specific Regulation D rule you will need to determine how much capital you’re raising, from whom you are raising it, and which state (or states) you are raising it in. See our section on Regulation D to read the different rules. Rules 504 and 506 are the most common exemption rules used. Rule 504 allows companies to raise up to $5,000,000 within a 12 month period, while Rule 506 allows companies to raise an unlimited amount of money. The SEC notes that 99% of companies who filed their Form D expressed that they relied on Rule 506, regardless of the amount of money they were raising. The SEC also noted that only 13% of companies reported using a registered broker-dealer to sell their securities, meaning, the securities were sold by a designated member of the company, e.g., CFO, or CEO.

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Can I deliver my PPM online?

Yes, provided you use a system that tracks the users and the readers, such as a DataRoom. Note that you need to keep good records of who has been invited to see the PPM and other offering materials, and also to make sure you know who has actually downloaded them.

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Is your system secure?

Yes, it sure is! Our system is SSL Secured and encrypted. To check us out click the “green browser bar” with the lock showing. This should detail our company information and show you our SSL Certificate. You can also click the “MacAfee” logo at the bottom right side of our website. This will show you the status of our web servers.

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My template format is strange, how can I fix it?

Microsoft Word definitely displays document formats differently from version to version, e.g., 1998-2003, 2003-2007, Office 365, etc. The Windows operating system also affects the formatting. We have indeed witnessed format differences in all kinds of different documents when working in MS Word, so we chose to format all our documents in the most reliable format “.DOCX.”

Here’s a great article on Microsoft Word formatting: CLICK HERE

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How do I find my State Regulator to file Blue Sky forms in my state?

Visit our List of State Regulators, CLICK HERE!

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