So lost in the legal aspects of partners.

[Account Closed]

Hi everyone,

I must say that I am completely lost with all of the legal aspects of bringing on a partner into a deal.

I have heard multiple times that you shouldn't deal with investors who are not accredited. I also know that there are SEC laws that regulate how you are able to find and contact investors. The problem is that I don't really know the rules of this type of stuff and I want to make sure that I fully know what the rules are before I even attempt to contact investors. The last thing that I want to do is to break an SEC rule or law on accident because I don't know!

I have a family member who has expressed some interest in partnering on a deal but this person does not have $1,000,000 net worth or a $250,000 yearly income so what does this mean for me? Does it mean that since they aren't an accredited investor that I can't do anything with this?

As you can see, I am very, very confused on how this process works legally. Am I even close with this or am I making it harder that it really is?

I really hope that this question/concern isn't too vague. As my profile states, I am a beginner and I am just trying to learn as much as I possibly can and I know this is a very important area I need to learn.

If you have any information or maybe a source that could help me better understand all of this I would GREATLY appreciate it!

[Brian Burke]

Nick, any time you have investors in a deal, and they don't have an element of control (such as being on title with you), their investment is dependent upon the success of your efforts. This means that their investment is the purchase of a security and subject to the securities act of 1933.

This is not the kiss of death however. There are exemptions in the act that allow the sale of securities without registering as a publicly traded security. One example is through a private offering in compliance with regulation D.

Another example is doing a deal with 35 or fewer investors with whom you have a pre-existing personal or business relationship and you have not done any general solicitation (advertising). It sounds like your example might fit into this category. In this case, the investors don't have to be accredited.

There is a very simple solution when you are lost in the very complicated world of securities laws: go visit an attorney, describe exactly what you intend to do, and follow the attorney's instructions carefully. I am not an attorney, so take everything I said for what it is: an opinion, not legal advice.