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Raising Capital in Utah call the Division at (801) 530-6600
FREQUENTLY ASKED QUESTIONS
I'm raising money from friends and family to fund my private business.  Do I have to comply with all these complicated securities regulations?
Yes. Unfortunately, there is no friends and family exemption. If you are raising money through a securities transaction, you will need to comply with all applicable securities laws. You should consult with a securities attorney to discuss the legal issues involved since securities laws are extremely complicated. If you make a securities offering, a securities attorney and a certified public accountant are crucial since you will need to provide all investors, including friends and family, full disclosure of all material information.
Are there any restrictions to raising capital?
Yes. The specific restrictions will vary depending on whether the security is registered, exempt, or a federally covered security. These restrictions may affect how you want to proceed in raising capital for the business, which is why such matters should be discussed with a securities attorney.
Do I need to file with the Division?
Maybe. You need to discuss this with a securities attorney or a member of the Division’s Corporate Finance staff. Sometimes an exempt security or transaction may be self-executing and not require any filing with the Division, but in many cases a filing must be made with the Division.
If the security is exempt, am I exempt from all securities laws?
No. A securities exemption only applies to the issuance of a security. The securities exemption does NOT exempt the issuer from anti-fraud provisions in the Utah Uniform Securities Act. Also, a securities exemption does NOT exempt the issuer, agents, or managers from any licensing requirements.
Do I have to be licensed (or work with a licensed agent) to raise capital?
Maybe. Depending on the nature of the business and the role that you or others have in the company receiving financing, you may need to be licensed to raise capital or work with a licensed company/person to raise capital. You should discuss this with a securities attorney or a member of the Division’s staff. You may also want to read the Division’s Letter on Business Brokering.
With what regulatory agencies do I need to comply?
Depending on the nature of the business, the location of all parties (e.g. company, investors, solicitors), and the type of securities offered, you may be regulated by any combination of the following: The Utah Division of Securities, the Utah Division of Corporations, the Utah Division of Real Estate, the Utah Department of Financial Institutions (DFI), the Utah Department of Insurance, the Securities and Exchange Commission (SEC), The Commodities and Futures Trading Commission (CFTC), and other state securities regulators. To determine all applicable regulators, you should check with legal counsel.

An entrepreneur's idea, product, or service often needs capital to become a business.  Unless the entrepreneur obtains a loan through a financial institution, the raising of capital is likely a securities transaction.

Equity vs. Debt Financing

Essentially, businesses raise money through equity financing or debt financing.  Equity financing is when businesses raise funds by selling an ownership in their business (e.g. stock, partnership interests, limited liability company interests).  Debt financing is when businesses raise funds by selling debt in their business (e.g. bonds, notes).  Whatever the instrument, if a business raises capital through equity or debt, they are likely issuing a security.

Corporate Finance and Securities Registration Requirements

To issue a security so that a business may raise capital, that security must meet one of three requirements outlined in Section 61-1-7 of the Utah Uniform Securities Act ("Act"):

  1. The security is registered with the state of Utah;
  2. The security or transaction is exempted under Section 61-1-14 of the Act; or
  3. The security is a federal covered security for which a notice filing has been made pursuant to the provisions of Section 61-1-15.5 of the Act.

Which method of issuing a security depends on the particulars of your business and should be discussed with a securities attorney.  However, the Division's Corporate Finance Section can discuss some of the general requirements with you at (801) 530-6600.

Solicitors, Finders, Business Brokers

If a capital-seeking company seeks the assistance of another person or company to help raise its capital, that third party may need to be licensed as a broker-dealer, broker-dealer agent, or issuer-agent to effect the securities transaction and receive compensation.

More information about these licenses and obtaining them can be found in Licensing.

Also, you may find the Division’s Business Brokering Letter helpful.

The Use of Raised Funds

While most businesses raise capital to begin production of their product or rendering of their service, some companies seek to raise capital to make investments in other companies or opportunities.  In this context, the capital raised is a pooled investment fund.  In such a fund, the entity and individuals may need to be licensed.  Before raising capital for investing purposes, please contact the Division to discuss the business model and determine if licensing would be required.