Legal requirements

You are not allowed to advertise ownership interests in your business or sell to people you do not know unless you have registered with the SEC (Securities and Exchange Commission). Registering with the SEC is a cumbersome process, and few non-public companies go through the process.

You can, however, sell an ownership interest to people who meet the SEC requirements for an "accredited investor" through a private placement. There are multiple ways that someone can be an accredited investor, but usually it means they have a net worth of $1 million at the time of purchase. Click here for complete information.

Private placement means that the sale was made to someone known to the financial intermediary or the seller; i.e. there was no advertising to the public at large.

Even if you use a private placement to an accredited investor, it is strongly suggested that you work with an attorney experienced in private placements.