Where an entrepreneur feels that a venture might have wide public appeal, or that some group of investors might be more comfortable with a formal division of ownership, the decision may be made to distribute stock in the corporation in proportion to ownership. For the protection of investors, this process is more tightly regulated than direct sales of ownership interest.

Simply stated, it is against the law to sell stock unless you are licensed to do so or can qualify for an exemption from the Securities and Exchange Commission (SEC) and the various states securities commissions' rules. Let us take a look at some of the exemptions.

Regulation D

For some entrepreneurs, the best vehicle to accomplish initial equity financing under an exemption is through the use of Regulation D, which is a limited offer and sale of their company's stock, or securities, without registration under the Federal Securities Act of 1933. Some risks continue under