Private Placement Advisors LLC 





advising on exempt offerings to find investors.  

504 v. 506(b v. 506(c


504 v. 506(b v. 506(c



There are two common types of securities that companies offer with Regulation D: equity and debt.


Equity Offerings


Equity securities consist of shares for a corporation or membership units for an LLC. They represent a portion of the ownership interest in the company. Stockholders are entitled to vote on company matters and must receive all key information about the company, including financial statements, on a regular basis.


Debt Offerings


Debt securities usually consist of notes representing debt obligations of the company, with a specified interest rate, maturity date, and repayment amount. A company should only offer debt securities if it can demonstrate that it has the ability to repay the debt.


Regulation D provides three exemptions from registration.


a) Rule 504


Rule 504 provides an exemption for the offer and sale of up to $1,000,000 of securities in a 12-month period. The company may use this exemption so long as it is not a blank check company and is not subject to Exchange Act reporting requirements. As with other Regulation D exemptions, you may not use public solicitation or advertising to market securities, and purchasers receive "restricted" securities--meaning they may not sell the securities without registration or an applicable exemption.


This exemption may be used for a public offering for which investors will receive freely tradable securities under these circumstances:

1) The offering is registered exclusively in one or more states that require a publicly filed registration statement and delivery of a substantive disclosure document to investors;


2) The registration and sale takes place in a state that requires registration and disclosure delivery and the buyer is in a state without those requirements as long as the disclosure documents mandated by the state in which he/she is registered to all purchasers are delivered; or


3) The securities are sold according to state law exemptions that permit general solicitation and advertising and you are selling only to accredited investors. (However, accredited investors are only needed when sold exclusively with state law exemptions on solicitation.)


b) Rule 505


Rule 505 issuers are required to provide financials certified by an independent public accountant. However, if a company other than a limited partnership cannot obtain audited financial statements without unreasonable effort or expense, only the company's balance sheet, to be dated within 120 days of the start of the offering, must be audited; and Rule 505 provides an exemption for offers and sales of securities totaling up to $5 million in any 12-month period.


Under this exemption, securities may be sold to an unlimited number of "accredited investors" and up to 35 "unaccredited investors" who do not need to satisfy the sophistication or wealth standards associated with the other exemptions.


Purchasers must buy for investment only, not for resale. The securities are restricted in sense that investors may not sell them for at least two years. General solicitation or advertising to sell the securities is not allowed.


Financial statements need to be certified by an independent public accountant. If a company other than a limited partnership cannot obtain audited financial statements without unreasonable effort or expense, only the company's balance sheet, to be dated within 120 days of the start of the offering, must be audited. Limited partnerships unable to obtain required financial statements without unreasonable effort or expense may furnish audited financial statements prepared under federal income tax laws.


Rule 506(b and Rule 506(c


* Issuer must be available to answer questions by prospective purchasers
* Financial statement requirements same as Rule 505
* Investors receive restricted securities which cannot be traded in the secondary market for a year after the offering
* Issuer can raise an unlimited amount of capital
* Limitless and online advertising under 506(c


To get started or just to ask questions, email [email protected]

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