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In order to sell securities to investors legally - you must follow the rules and regulations that govern these sales as set forth by the Securities and Exchange Commission and State securities regulators.
THE SEC has specific rules concerning how a private company solicits capital from investors - even if very few investors are involved.
Business plans typically just provide general information about the company, its business model, goals, etc. Business plans do not provide specific investment structure or the fundamental documentation necessary to accommodate investment from individual investors.
The overwhelming majority of companies that are just using a business plan to raise capital (whether for $10,000 or $10,000,000) typically have very little transaction structure. Any private company or entrepreneur that is seeking to raise equity capital or private debt financing from investors should have an offering in place.
Even if your transaction will only involve one or two investors - you still need to provide the proper transaction framework, disclosure documentation and investment agreements necessary for raising capital.
You need to use an SEC program, like Regulation D, to legally sell your company's securities to the investors. It is impossible for an investor to invest debt or equity capital, of any amount, into your company without having the fundamentals in place. Business plans alone do not provide these fundamental items.
Regulation D
A Regulation D Offering bolsters your business plan with the critical elements needed to properly and effectively raise capital from investors. The Regulation D Offering Programs are typically utilized to raise from $25,000 to $15,000,000 in capital. Regulation D Offerings are used for a wide variety of transaction and industry types: seed capital, corporate expansion capital, film production capital, real estate equity funding (acquisitions, development projects, golf courses, rehab), capitalization for early to pre-IPO stage Internet and technology companies, expansion funding for retail companies, and product development and distribution funding, etc.
SEC Filing - Form D
The Form D is the notification filing that is sent to the SEC in Washington, DC. It notifies the SEC that you are using the Regulation D program and provides them basic information on the company and the offering. It is not an approval document or registration - it is merely a filing that notifies the SEC that you have a Regulation D Offering in place. Raising capital from investors without filing this document with the Federal government could place your company in violation of securities laws.
We suggest you do you own further research on this matter: www.sec.gov
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