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W W W. M A I N E B I Z . B I Z 41 FA C T BO O K / D O I N G B U S I N E S S I N M A I N E B U S I N E S S R E S O U R C E S Y ou have been dreaming about moving your business to Maine and have been talking with potential investors about the funds to make the move possible. One potential investor off ers to lend you the money to be paid back over fi ve years. Another off ers to provide working capital in return for 50% ownership of your business. is is America, the land of free enterprise — you can accept these off ers if you want to, right? Um, not so fast. When your business accepts money from an investor, you need to understand and comply with state and federal securities laws. When is someone an 'investor'? In general, an investor is anyone who provides money to be used in your business. is is true whether it's a loan or an ownership stake. What is the legal consequence of having an investor? Before you or your business accept money from an investor, you need to comply with state and federal securities laws. State and federal securities laws are triggered, and automatically apply, whenever someone invests in that busi- ness, either through a loan or in return for an ownership stake in the business. Note that in order to comply with these laws, you need to take action before you accept the money. If you wait until after you accept the money, you are too late and may have violated the laws. What are the purposes of securities laws and who do they protect? One purpose of securities laws is to protect investors from bad investments. e laws do this by requiring that the business owners provide relevant infor- mation about the business to potential investors so that they can make an informed decision whether to invest. e securities laws also are designed to ensure that businesses do not take investments from people who cannot aff ord to lose their money. Does the amount of the investment matter? Yes and no. Securities laws apply to any investment, no matter how small, and require that the business provide information to investors before they make their decision to invest. e larger the investment, the greater the scope of disclosure requirements. You say there are both state and federal securities laws? How do I know which ones apply? e answer depends upon where your business is located and where your inves- tors live. In most cases, you will need to comply both with federal securi- ties laws, and with the securities laws for the states where your business is located and where your investors live. What do I need to do to comply with securities laws? e requirements vary depending upon a number of factors, but generally speak- ing compliance with securities laws is accomplished in three ways: 1. e business must provide writ- ten fi nancial information to the potential investors. 2. e business must ensure that the investor can afford to lose his or her investment. 3. Legal forms need to be fi led with the applicable state or federal agen- cies together with any fi ling fees. What are the consequences if I fail to comply with securities laws? e penalties for failure to comply with securities laws can be severe. In most cases, failure to comply will mean that the owners or managers of the busi- ness will become personally liable for returning those funds to the investor, particularly if the business fails or is unable to repay those funds. In circum- stances where the failure to comply with securities laws was intentional, or where inaccurate or incomplete information was provided, criminal sanctions can be imposed. How can I learn more about securities laws and how to comply with them? A qualifi ed attorney can help you understand and comply with securities laws. e SEC website has some good resources on federal securities at law www.sec.gov/info/smallbus/qasbsec. htm. Maine has good online resources at www.maine.gov/pfr/securities/ small_business/index.htm. C B i s c h a i r o f t h e b u s i n e s s a n d cor porate la w pra ctice at the la w f ir m Mur ray, Plumb & M u r ra y . H e c a n b e r e a c h e d a t @ . A great place to live, work, and play! Wilton is in southern Franklin County, an area known for diverse year-round outdoor activities. The Wilton area boasts skilled craftspeople and production workers and is home to a number of manufacturing facilities, lodging accommodations, and an excellent school system. The county hospital is located just over the town line. Town of Wilton 207-645-4961 wiltonmaine.org Development incentives: • Two TIF Districts • Assist with Business Assistance Grants • Pine tree Development Zone • Town Revolving Loan Located directly on the Route 2 corridor: • 45 minutes to Augusta or Lewiston/Auburn • One hour to six ski areas in Franklin and Oxford Counties Wilton Help us impact the lives of our neighbors by becoming a host site or referral partner Together we can create a healthier Maine. •• Healthy Living for ME • I m p rov i n g t h e lives o f M a i n er s H OW TO B Y C H R I S T O P H E R B . B R A N S O N Move your business to Maine