An offering of securities under California law is either a qualified offering, exempt from qualification or illegal.
Generally speaking, qualifying securities is expensive so your best bet is to identify an exemption and a commonly used California exemption that works for a lot of new companies is Cal Corp Code §25102(f). This section provides an exemption from qualification of any offer or sale of a security that meets the following criteria:
1. Sales of the security are not made to more than 35 persons.
2. All of the purchasers either have a preexisting personal or business relationship with the offeror or any of its partners, officers, directors or controlling persons.
3. Each purchaser represents that the purchaser is purchasing for the purchaser's own account and not with a view to or for sale in connection with any distribution of the security.
4. The offer and sale of the security is not accomplished by the publication of any advertisement.
It is necessary also to file a Limited Offering Exemption Notice to the California Department of Corporations.
For the purposes of California law, the above exemption frequently works for new enterprises because the investors likely have an existing relationship with the management of the new company and the number of investors is limited.
Any offering of securities must also comply with federal laws regarding the offering of securities.
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