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Private Placement Memorandum

When you're about to land a private investor for your company, you can lay out exactly what they are getting into with a Private Placement Memorandum. This document gives security to you, and to your... Read More

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Making a Private Placement Memorandum

  • What is a Private Placement Memorandum?

    When you're about to land a private investor for your company, you can lay out exactly what they are getting into with a Private Placement Memorandum. This document gives security to you, and to your investor, in case questions arise later. If you're about to invest in a company, you'll want to know as much as you can about its current state of health. A Private Placement Memorandum can help kickstart an open and honest business relationship.

  • How do you write a Private Placement Memorandum?

    A Private Placement Memorandum is a disclosure document used by privately owned businesses raising money through private securities transactions. Rocket Lawyer offers a free Private Placement Memorandum to use if:

    • You are a private investor considering investing in a privately held company.
    • You are a business owner and you are seeking an external investor.
    • You are a business owner attempting to prepare a Private Placement Memorandum for future investment opportunities.
  • What is included in a Private Placement Memorandum?

    A Private Placement Memorandum is a business document that is designed to provide a full and transparent disclosure to potential investors. It generally includes:

    • Full disclosure regarding the terms being offered
    • General information about the company, including financial statements
    • Operations information
    • Management information
    • Intended use of the investment funding
    • Risk factors associated with the specific business as well as the industry at large
  • What does a Private Placement Memorandum look like?

    You can input the information relevant to your company to see a finished Private Placement Memorandum. It generally looks similar to a term sheet, and often includes information regarding the overall capitalization of the company–both the current state as well as anticipated outlook following investment. The Private Placement Memorandum should also include the number and type of total shares being sold, the price per share, and the total expected overall proceeds.

  • Do I need a Private Placement Memorandum?

    A Private Placement Memorandum (PPM) is a smart choice for investors and business owners alike. It offers protection against potential legal liability while simultaneously presenting a detailed risk assessment to potential investors. While Private Placement Memoranda do not need to be filed with the U.S. Securities and Exchange Commission (SEC), the SEC has warned prospective investors that the absence of a PPM is a potential red flag.

    A PPM must contain current, truthful, and accurate information. It should contain a realistic forecast so that investors can proceed with reasonable caution that financial targets will be met.

    However, whether you need a PPM may depend on the type of financing you are seeking. A Venture Capital Firm may only require a business plan to proceed with investing in your business.

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