In a recent post I provided an overview of raising capital under Washington States WAC 460-44A-505 (Rule 505). Today, I’m going to explain another exemption provided for by Federal and State law under which a company can raise capital, Rule 506. The basics of Rule 506, codified in WAC 460-44A-506, are as follows:
1) There is no maximum offering amount;
2) You can sell to an unlimited number of accredited investors;
3) You cannot sell to more than 35 non-accredited investors (you don’t want to sell to any non-accredited investors, however).
As discussed in our last post, the Securities Act of 1933 and 1934 were primarily put into place to protect investors in the wake of the stock market crash of 1929. In light of this, the most important factor in any securities offering is...