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I'm a private real estate investor (not a company) looking to advertise for an investor/partner for startup capital. I'm looking for someone to be a cash investor/partner with me in acquiring single family homes for fix up and resell. I would like to know what the legal guidelines are for advertising for cash investors (i.e angel investors, etc..). I've contacted the SEC, but have been given some very gray area guidelines of what constitutes selling a security. i believe if I advertise with the idea of evrything being a 50/50 split (both going on title), both contributing some money and making decisions, that I should be fine. I'm just concerned with usury laws, securities violations, etc.. If anyone has experience in this matter, your opinion would be greatly appreciated. I'm not asking for binding legal info, just expereinced opinions.

Thanks,

Tom

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If you are seeking an active partner who can participate financially in an LLP, you should be fine. The law for advertising securities goes deep, however it doesn't seem like you've yet to issue any securities. In fact, you said you are a "private real estate investor (not a company)," which means you don't even have a legal formation from which to issue securities (and thus can't violate the law by advertising those securities).

Remember in this case, that the spirit of the set of laws in question is to prevent lay people from loosing their fortune in a get-rich-quick scheme. For instance, if you were to file a Form D and offer units of an LLC or shares of a C Corp, you would not be allowed to solicit the general public (advertise) nor would you be able to take on too many unsophisticated (broke) investors.

The same holds true for your scenario. If you haven't even formed a company and you are just seeking a partner who can financially participate in a hypothetical partnership, then they'll probably leave you alone. If you are advertising in the New York Times asking anyone who wants to make $$$, that they call your 800 number and become a "partner," you may get in trouble, because you violated the spirit of investor protection laws.

(Hope this helps...and I'm obligated to say, take this advice with a grain of salt. I am liable for none of it! :) Good luck!

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Appreciate your input Emile – user5981 Dec 15 '10 at 15:21
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If you approach it as a partnership you avoid the SEC securities laws. You can have a silent partner. You might also do better with an ad that reads seeking silent partner. Or seeking investment partner rather than CASH investor.

In the details say that you are seeking cash, although I dont understand why cash is any different than an investor that has access to liquid credit lines.

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Thanks Franky B. Your point on liquid credit lines is well taken. – user5981 Dec 14 '10 at 17:45
if you go down the partnership route make sure you have an agreement in writing that spells out the terms of the partnership, otherwise if the other person buys a Porsche and defaults on the payments your liable for half! – Ben Dec 15 '10 at 1:20
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I would spend the money to go see a good lawyer for advise, when it comes to legal issues you want to be sure your in the right, the couple of hundred dollars you will spend is a small price to pay to mitigate your legal risks.

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Thanks Ben - I believe that's the direction I'm heading before engaging in any advertisements. – user5981 Dec 15 '10 at 15:17

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