The Top 10 Most Frequently Asked Questions About Raising Capital

Wondering what others ask about raising capital legally? Discover our answers to the 10 most common questions clients ask.

Raising capital is both an exciting opportunity and a legal minefield. Whether you’re a startup, syndicator, or emerging fund manager, understanding how to navigate securities laws is essential. At PPM LAWYERS, we’ve helped hundreds and hundreds of clients raise money legally.  Along the way, we’ve heard just about every question you can imagine.

In this article, we’ll answer the 10 most frequently asked questions about legal capital raising so you can move forward with confidence and avoid costly mistakes.

1. Do I really need a lawyer to raise capital?

Yes. Any time you’re offering securities—meaning you’re asking people (anyone) to invest money into a business or real estate deal with the expectation of profit—you’re dealing with federal and state securities laws. Violating them, even unintentionally, can trigger fines, lawsuits, or SEC investigations.

A lawyer ensures your offering complies with exemptions under Regulation D or other applicable rules, protecting you and your investors.

2. What is a Private Placement Memorandum (PPM), and do I need one?

A PPM is a detailed legal disclosure document that explains your investment opportunity, the associated risks, your business model, and how you’ll use investor funds. A PPM:

• Protects you from liability
• Increases investor trust
• Is essential when raising under Reg D 506(b) or 506(c)

3. What’s the difference between Regulation D 506(b) and 506(c)?

• 506(b): You can raise money from up to 35 non-accredited investors and unlimited accredited investors, but you can’tadvertise or solicit publicly.
• 506(c): You canadvertise, but you must verify that all investors are accredited (no non-accredited investors).

Your choice depends on your fundraising strategy, investor base, and whether you’re using public marketing.

Pro Tip: You must decide on 506(b) or 506(c) before launching your offering.

4. Can I raise money from friends and family without legal documents?

Not safely. Many founders assume that informal raises from personal networks are exempt from securities laws. They’re not. Even friends and family investments are subject to SEC rules.

You’ll still need proper disclosures—typically a PPM—and must document the raise carefully.

5. Do I need to register my offering with the SEC?

In most private offerings, no—you can rely on exemptions like Regulation D, which allow you to raise capital without SEC registration. But you must still file Form D (this filing confirms your exemption from registration) and comply with state-level Blue Sky laws.

Skipping this step is one of the most common legal mistakes we see. And skipping can lead to very serious and expensive consequences.

6. What qualifies someone as an “accredited investor”?

According to the SEC, an accredited investor is typically someone who:

• Has a net worth over $1 million (excluding their primary residence), or
• Earns over $200,000 annually ($300,000 with a spouse) in the last two years, with an expectation to continue.

There are other qualifications (e.g., financial professionals), but these are the most common.

7. Can I use an online platform or crowdfunding site to raise capital legally?

Yes, but with caution. Online fundraising platforms are governed by specific exemptions like:

• Reg CF (Crowdfunding): Great for small raises, but heavily regulated.
• Reg A+: Allows for broader marketing, but requires SEC qualification.
• Reg D (506c): Allows online marketing and sales to accredited investors only.

You still need legal compliance and may need a PPM or similar disclosure documents, depending on the structure.

8. What’s the legal risk if I skip the PPM or other documents?

The biggest risk is being liable for securities fraud even if unintentional. If investors lose money and claim you didn’t adequately disclose risks, you can be sued for misrepresentation. The SEC can also investigate and impose penalties. And to be clear, you do not have to intend to commit fraud to be liable for securities fraud—it’s simply a matter of disclosure.

A PPM acts as a protective legal shield, so don’t skip it.

9. How much does it cost to have a PPM drafted by a lawyer?

Costs vary based on complexity and from law firm to law firm.  To put things into context, the average medium-sized law firm can charge $30,000 or more (sometimes a lot more) for a custom-drafted PPM. While templates might seem cheaper, they can’t account for the nuances of your specific offering, structure, or legal compliance needs. However, PPM LAWYERS bills on a fixed, flat fee basis and typically ranges from $12,000 to $18,000, which includes all PPM documents, advice and counsel, and SEC/state filings.

Think of it as an investment in doing it right the first time and avoiding much costlier legal trouble later.

10. What if I already raised money without a PPM—what should I do now?

If you’ve already taken investor money without the proper legal documentation, you may need to conduct a retrospective compliance cleanup. This could include:

• Drafting and distributing late disclosures
• Filing Form D and state notices
• Assessing investor eligibility
• Consulting with a securities lawyer immediately

The longer you wait, the greater your risk.

Final Thoughts: Raise Capital the Right Way

These are just the most common questions, but every deal is unique. The bottom line is this: Raising capital legally isn’t optional; it’s critical to protect your business and your investors.

Whether you’re planning a real estate syndication/fund, launching a private investment fund, or raising money for your startup, you need the right legal strategy in place.

Book a Free Strategy Call to Get Your Legal Docs in Place

We’ll walk you through what you need, when you need it, and how to stay compliant so you can raise capital with confidence.