Legal Question in Business Law in Pennsylvania
Issuing Stock in a newly formed S-corp
What do I need to know about raising money for a startup for a S-corp? How do I lawfully issue stock in exchange for capital?
On another note, if I process payments using credit and debit cards on the internet as a specialized service business for other businesses, does this constitute 'factoring?' I have read the law before and am very confused. I see several other companies (i.e. my electric company) doing this and it seems to be right in line with what I will be doing. I definitely do not want to break the law nor do I want to be black listed for the rest of my life by the credit card industry.
2 Answers from Attorneys
Re: Issuing Stock in a newly formed S-corp
What you need to know is that, any time you offer any type of investment to others, you run the risk of violating federal and state securities laws. Offers below a certain amount of money, and to fewer than a certain number of people, are generally exempt from federal securities laws, but you really, really, really want to have an attorney review the situation and provide you with an opinion letter that says your conduct complies with the law. Failure to do so can expose you to severe civil and criminal penalties, including penalties for fraud.
I know it is probably not the answer you wanted, but you need a business attorney. The cost is minimal compared to the extraordinary damage that can be caused by improper securities offers or by inappropriate credit card transactions. If you hate attorneys that bill by the hour, a number of business attorneys these days are happy to work for a flat fee. You don't need anything particularly fancy, and you don't need to go to a large firm; if there are a number of small firms and solo attorneys that can provide general small business services. Just ask for experience in private securities offers and in credit card merchant agreements.
Re: Issuing Stock in a newly formed S-corp
You are dealing with an area of the law known as securities law. You will need an attorney who has a great deal of knowledge in this area. E-mail me and let me know what city you are near and I will put you in touch with an attorney who can help you.
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