How do I offer stock in my company to potential investors even if I am not on a stock exchange?
Last Updated on Saturday, 20 December 2008 10:14 Written by Gary.L Friday, 19 December 2008 12:32
I have a venture that is at the point of needing more capital, around $15,000.00. My company / venture is too small for some SBA money and too large to invest any more of my own capital. I’ve decided to incorporate in Delaware and issue shares. I’ve added up all my company assets and came up with a price per share of value. I’ve also caculated how much more I need to bring my product to market. I’ve taken the amount and divided by possible issuing shares and came up with a reasonable selling price. My problem is since I (again) too small to trade on a stock exchange I need to get ideas on how to market my shares. Please provide objective ideas. Thank you.
-Joe
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Tags: Market Shares, stock exchange, Trade Stock
It does not seem reasonable to incorporate in order to issue $15,000 of stock. that does not mean that you should not use a corporation to operate your business. However, to market shares for $15,000, you need to find several investors willing to risk their money on your business. That means you have to convince them of the potential of your business, your skill in managing it, and your ability to make it profitable. If the business is already operating, you should provide potential investors with financial statements. If it is not yet operating, you should prepare a business plan.
You also need to investigate state laws for issuing small amounts of stock. If you are selling the stock to family members and friends, it should be no problem and the investors will hold closely held shares that they cannot sell in a market. The amount is too small to require any kind of registration or permit to issue stock.
Your calculations of stock price may not be relevant. The price will depend on your ability to show potential investors what their investment can return. You say you have to bring your product to market, which means you are just starting, and investors will want some assurances that you can succeed. They will want to know how much you have invested, and what you have done with it so far. For $15,000, investors may want to have a majority of the shares, for example 60-80 percent, unless you already have assets that amount to considerably more than $15,000. How you value your assets is also important, as is the amount of any liabilities you may have. The answer to your question is too complex to go into any more detail without knowing more facts and figures.
Actually, incorporation is a good idea because it limits your liability. I am not too familiar with corporation law but if I recall correctly you will need several officers for your corporation. Another alternative is a partnership. You really do need to talk to a lawyer familiar with business practices to determine how you should proceed. This question is way too complicated for this forum in my opinion.
I don’t think selling stock is quite that easy. you would be better off finding partners or an investor that will loan you the money. To sell shares of you company I’m pretty sure you have to be registered with your state administrator and you would have to come up with a UFOC to offer each of the holders and pay a fee to be registered.
When trying to find a partner you may need to set them up as a limited liability partner so that nothing more than their investment is at risk, as a general partner their personal assets would be liable to claims of any creditors and this would not be attractive. Other wise you could place an add in the paper for an investor wanted for a loan offering a competitive rate of return better than they can get anywhere else or you will attract no one.
remember that selling stock or getting new partners you would be giving some of the equity up in your company, but getting a loan you would have to secure it even with a privat investor likely