People are rarely sued when a deal goes as planned and all financial expectations are met. But we rarely structure deals and form legal entities for the best-case scenarios. We structure them to protect us from the worst-case.
Did you know that if you raise money just from one person (even if that person is your own mother), that you can be subject to the Securities Laws?
Did you know that if you violate the Securities Act, you could be exposed to substantial civil and criminal penalties for the sale of unlicensed Securities and well as substantial legal fees incurred on your defense? Yes, just for partnering with one person.
If you are like me, you need to raise capital to do deals. Other people’s money is what makes real estate generate a viable return on investment. (See my next article about the mathematical power leveraging.)
To prevent being subject to the Securities Act, you need to qualify for an exemption such as the “Private Placement” exemption. It is easier than you might think but you need to know the rules and how to be in compliance.
This is where Gene Trowbridge’s book is such an important tool. I have found this to be a must-have resource that you will refer to over and over again. It is the most comprehensive reference material for joint ventures and investment groups.