Understanding Private Placements

By Sylvia M. Scott

Private placements are, in the simplest terms, a way for businesses to raise capital by selling securities to private investors. Rather than

making shares in a company available to the general public (as with an initial public offering),

a private placement makes those shares available to only a limited number of suitable

individuals.

An obvious benefit of private placements is that they do not have to be registered with the

Securities and Exchange Commission. Recent legislation has been passed to make private

placements a more viable form of capital raising and to make private capital more readily

available to owners of small businesses who might otherwise find raising capital too difficult.

Nonetheless, businesses that offer private placements must be careful to follow the many rules that continue to govern private offerings. To ensure that the process goes smoothly and

passes legal muster, businesses should be sure to work with an accountant and attorney who are familiar with the legal and financial

requirements of private placements.

About Sylvia M. Scott:

Sylvia M. Scott serves as an attorney with Freeman, Freeman & Smiley LLP. In addition to representing clients in court, Ms. Scott and her partners advise clients on private placements,

underwritings, and securities registration.