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Can I offer equity to investors without violating securities laws in Ohio? What are the requirements?
Offering Equity to Investors in Ohio
In Ohio, offering equity to investors may be subject to securities laws. The Ohio Revised Code defines a security as any certificate or instrument, or any oral, written, or electronic agreement, understanding, or opportunity, that represents title to or interest in, or is secured by any lien or charge upon, the capital, assets, profits, property, or credit of any person or of any public or governmental body, subdivision, or agency. It includes shares of stock, certificates for shares of stock, an uncertificated security, membership interests in limited liability companies, voting-trust certificates, warrants and options to purchase securities, subscription rights, interim receipts, interim certificates, promissory notes, all forms of commercial paper, evidences of indebtedness, bonds, debentures, land trust certificates, fee certificates, leasehold certificates, syndicate certificates, endowment certificates, interests in or under profit-sharing or participation agreements, interests in or under oil, gas, or mining leases, preorganization or reorganization subscriptions, preorganization certificates, reorganization certificates, interests in any trust or pretended trust, any investment contract, any life settlement interest, any instrument evidencing a promise or an agreement to pay money, warehouse receipts for intoxicating liquor, and the currency of any government other than those of the United States and Canada, but sections 1707.01 to 1707.50 of the Revised Code do not apply to the sale of real estate [1.1].
Requirements for Offering Equity to Investors
If you plan to offer equity to investors in Ohio, you may need to comply with securities laws. The Ohio Revised Code requires that securities be registered or exempt from registration before they can be offered or sold in Ohio [1.1].
There are several exemptions from registration that may be available to you, including:
- Private Placement Exemption: This exemption allows for the sale of securities to a limited number of investors who have a pre-existing relationship with the issuer and who have the knowledge and experience to evaluate the investment [1.1].
- Intrastate Exemption: This exemption allows for the sale of securities to Ohio residents only, provided that the issuer is an Ohio resident, the securities are offered and sold exclusively in Ohio, and the issuer does not use general solicitation or advertising to market the securities [1.1].
- Crowdfunding Exemption: This exemption allows for the sale of securities through an online crowdfunding platform to Ohio residents only, provided that the issuer complies with certain requirements, including limits on the amount of money that can be raised and the amount that each investor can invest [1.1].
It is important to note that these exemptions have specific requirements and limitations, and failure to comply with securities laws can result in civil and criminal penalties. Therefore, it is recommended that you consult with a qualified attorney before offering equity to investors in Ohio [1.1].
Conclusion
Offering equity to investors in Ohio may be subject to securities laws, and securities must be registered or exempt from registration before they can be offered or sold in Ohio. There are several exemptions from registration that may be available, including the private placement exemption, intrastate exemption, and crowdfunding exemption. It is important to consult with a qualified attorney before offering equity to investors in Ohio to ensure compliance with securities laws [1.1].
Source(s):
Jurisdiction
Ohio