When raising capital from investors you are engaging in an act that can have very serious implications. One of the benefits of an offering is the capability to limit the liability of the principals or managers of the company.The detailed disclosures in a Regulation D Offering memorandum limit the liability of company principals by disclosing all pertinent information to the investor before they make an investment decision. Most business plans do not disclose the proper information to properly inform investors of potential risks and key investment considerations.
If you have not provided proper disclosure to an investor - and they become disenchanted with the investment or if the company fails - the investor has the capability to cause problems for principals due to their negligence in properly informing the investor about the specifics of the investment transaction. Limit your liability by raising capital using proper techniques and documents.
