Help & How-To

Legal Issues
I have not yet started my business. Can I receive money from investors at this point?
A big portion of the capital-raising efforts of this business will be through investing in the stock market for growth. Is there a legal way to reinvest investors' money into the stock market without a series 7 license? I am trying to find out if I can begin the process before becoming incorporated. I also need to know what specific licenses, if any, I will need once I am incorporated.

Asked by Jeffron24
Posted: Friday, July 11, 2008  |  Found in Legal Issues


More answers by Nina Kaufman
Answer by Nina Kaufman
Tread very carefully when playing with other people's money.

It's not clear whether your business idea involves reinvesting your investors' money (certainly done through hedge funds and other vehicles) or whether you are looking at a higher-yield return on the money you are currently "parking" before you invest it in your company. Either way, do not invest other people's money without the proper licensing.

It's one thing to play around with your own portfolio, but when you invest other people's money for profit (yours and theirs), you are closely regulated by the Securities and Exchange Commission. Running afoul of the SEC is second only in legal torture to running afoul of the IRS.

In addition, you need to have full disclosure with your investors about the guidelines for investment, as they may have risk tolerances that differ from yours . . . which, aside from the securities violations, could leave you vulnerable to fraud charges. Do not skimp on consulting with an attorney who specializes in this area.
Nina Kaufman has a New York City-based boutique law practice and is president of Wise Counsel Press LLC, which produces legal information products for entrepreneurs. She writes the Making It Legal blog and the Business Law Advisor column for WomenEntrepreneur.com.

Note: This response is for your general information only. Be sure to consult with an attorney regarding your particular situation to get the advice you need.


Recent Articles & Resources
Insight from Business Experts
Turning Your Business Dreams Into Reality: Managing The Critic
Whether you're a solo entrepreneur, a small business owner, or a corporate executive, one of the things that can drive you absolutely nuts is trying to figure out how to silence the inner critic that rears its ugly head and stomps your business dreams into the ground whenever you try ...

The Art of Laying People Off
I hope that you never have to lay off or fire people, but the reality is that you will as you advance in your career. If you are scoffing (“Guy, you are clueless: We’ll never downsize, because we’re growing so fast, and I’ll never make a ...

Review of Guy Kawasaki’s “Reality Check”: Refreshingly Irreverent and Useful
"The Art of the Start" was my first introduction to Guy Kawasaki. I thought it was good. Reading his posts here on the OPEN Forum, was my second experience. I thought those were good too. Then following and being followed by Guy Kawasaki on Twitter piqued my ...

The Credit Crisis – what really matters?
Business experts Seth Godin and Tom Peters told us what they think business owners should really be concerned about amidst the economic headlines that are changing daily – and they don’t necessarily agree. Tom Peters offers this perspective: “When things are so off the charts (and) you’re dealing with an ...
Have a burning question? Ask now!

Meet the Experts