Raising Money From Friends And Family: Unlocking the Legalities of Raising Funds

When raising money from friends and family for a business or real estate investment, it's crucial to understand the legal implications. Many believe they can simply take a loan from their close ones, but such transactions often qualify as securities and must comply with legal regulations. This means offering clear terms and ensuring the process meets regulatory standards. Whether you opt for debt financing or equity stakes, the role of the investor—whether passive or active—determines the nature of the transaction. For those raising significant amounts, consulting a knowledgeable attorney can ensure compliance and prevent future legal issues. To get started with your syndication or fund visit https://www.moschettilaw.com

Raising capital from friends and family is common for new ventures or real estate investments, often through loans or equity. Such transactions are usually classified as securities, requiring legal compliance. If investors expect a profit and their role is passive, it is considered a security and must be registered with the SEC or meet an exemption.

Borrowing money or offering equity to relatives requires legal consideration due to the passive nature of the investor’s role. Without active involvement, the transaction is a security.

Consulting a syndication attorney is crucial when raising significant amounts, typically starting at around $500,000. Legal experts help structure the deal correctly, ensuring compliance and minimizing future legal risks.

Angel investors and venture capitalists usually do not fall under the same regulations because their involvement is active. However, funds raised from friends and family for passive investment purposes qualify as securities. Ensuring legal compliance from the outset protects both the business and the investors.

Chapters:
0:00 Introduction
0:23 Raising Money from Friends and Family
1:00 Legal Requirements
1:25 Debt Financing
2:08 Equity Stakes
3:04 Active vs Passive Roles
3:50 Legal Compliance Costs
4:42 Importance of Hiring an Attorney
6:09 Venture Capital vs Angel Investors

Read more about Raising Business Capital Legally & Effectively with Regulation D: https://www.moschettilaw.com/business...

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Moschetti Syndication Law Group is a boutique syndication law firm, serving small and growth-bound syndicators, and well as private equity firms. We keep our firm ‘boutique’ size so we can tailor the services to each client’s unique needs without turning the firm into a faceless factory or passing unnecessary overhead expenses onto our clients. (As our client, you’ll only pay a fixed fee, so no surprises.) As for the client experience, we give real-time answers without making you book an official appointment. And we’ll work with your ambitions and overall vision to help you close the current deal and fill-in that ‘missing’ piece - whatever you need - to keep adding more syndications to your portfolio. We keep syndicators syndicating (TM).

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