Legal Question in Business Law in Colorado

A friend and I have been working on some potentially lucrative software for about a year, him having quit his job to work on it full time, and me staying employed. We are at a point where the funds we'd set aside for his living expenses are coming to an end, and we have another few months of testing and deployment ahead. We are looking for ways to solicit angel investors and wonder if we can do this legally by selling 100 "investment units" that split 2% of the sale price of our company assuming a suitor is found. It is possible that investors could lose all their investment, but not likely. Is this legal as long as all risks, and intended payback amounts are known up front? Thank you.


Asked on 7/24/12, 1:41 pm

2 Answers from Attorneys
Daniel Pepper Pepper Law Group, LLC

Until the new Crowdfunding Act is fully enabled, you will need to comply with very specific SEC and state blue-sky laws regarding soliciting investment capital. These regulations can be quite complex, so I would strongly suggest you retain a qualified attorney to advise you, as the penalties can be severe. If you would like to discuss your situation further with me, feel free to contact my office.

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Answered on 7/24/12, 1:53 pm
Robert Murillo Pivotal Legal Ltd.

You cannot do this as you discuss. It would violate state and federal law. The investors can also demand all of their money back plus interest if you try to make an offer as you describe.

Speak with a Colorado business attorney before you ever consider getting investors as the rules are complicated and the consequences for violating those rules are severe.

Also, the new crowdfunding act, even when implemented, may not be effective for you and there are other routes that should be considered. Most private investors are solicited under Reg D Rule 506 and that will become even more so after the JOBS Act provisions are implemented.

Hire a Colorado attorney soon. In addition to any investor issues, you should have an attorney to advise you on the best business entity and to draft your shareholder or operating agreement. This is critical.

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Answered on 7/25/12, 1:51 am


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