The following information was taken from the Q&A: Small Business and the SEC page on the SEC website. That site has a lot more information so you might want to take a look at the site for the rest.

When your company needs additional capital, "going public" may be the right choice, but you should weigh your options carefully. If your company is in the very early stages of development, it may be better to seek loans from financial institutions or the Small Business Administration. Other alternatives include raising money by selling securities in transactions that are exempt from the registration process. We discuss these alternatives later.

There are benefits and new obligations that come from raising capital through a public offering registered with the SEC. While the benefits are attractive, be sure you are ready to assume these new obligations:

Benefits

Your access to capital will increase, since you can contact more potential investors. Your company may become more widely known.

You may obtain financing more easily in the future if investor interest in your company grows enough to sustain a secondary trading market in your securities.

Controlling shareholders, such as the company's officers or directors, may have a ready market for their shares, which means that they can more easily sell their interests at retirement, for diversification, or for some other reason.

Your company may be able to attract and retain more highly qualified personnel if it can offer stock options, bonuses, or other incentives with a known market value. The image of your company may be improved.

New Obligations

You must continue to keep shareholders informed about the company's business operations, financial condition, and management, incurring additional costs and new legal obligations. You may be liable if you do not fulfill these new legal obligations.

You may lose some flexibility in managing your company's affairs, particularly when shareholders must approve your actions.

Your public offering will take time and money to accomplish.

How Does My Small Business Register a Public Offering?

If you decide on a registered public offering, the Securities Act requires your company to file a registration statement with the SEC before the company can offer its securities for sale. You cannot actually sell the securities covered by the registration statement until the SEC staff declares it "effective," even though registration statements become public immediately upon filing.

Registration statements have two principal parts:

Part I is the prospectus, the legal offering or "selling" document. Your company - the "issuer" of the securities - must describe in the prospectus the important facts about its business operations, financial condition, and management. Everyone who buys the new issue, as well as anyone who is made an offer to purchase the securities, must have access to the prospectus.

Part II contains additional information that the company does not have to deliver to investors. Anyone can see this information by requesting it from one of the SEC's public reference rooms or by looking it up on the SEC Web site.

The Basic Registration Form - Form S-1

All companies can use Form S-1 to register their securities offerings. You should not prepare a registration statement as a fill-in-the-blank form, like a tax return. It should be similar to a brochure, providing readable information. If you file this form, your company must describe each of the following in the prospectus:

its business;

its properties;

its competition;

the identity of its officers and directors and their compensation;

material transactions between the company and its officers and directors;

material legal proceedings involving the company or its officers and directors;

the plan for distributing the securities; and the intended use of the proceeds of the offering.

Information about how to describe these items is set out in SEC rules. Registration statements also must include financial statements audited by an independent certified public accountant.

In addition to the information expressly required by the form, your company must also provide any other information that is necessary to make your disclosure complete and not misleading. You also must clearly describe any risks prominently in the prospectus, usually at the beginning. Examples of these risk factors are:

lack of business operating history;

adverse economic conditions in a particular industry;

lack of a market for the securities offered; and dependence upon key personnel.

Alternative Registration Forms for Small Business Issuers

If your company qualifies as a "small business issuer," it can choose to file its registration statement using one of the simplified small business forms. A small business issuer is a United States or Canadian issuer: that had less than $25 million in revenues in its last fiscal year, and whose outstanding publicly-held stock is worth no more than $25 million.

Form SB-1 - To Raise $10 Million or Less

Small business issuers offering up to $10 million worth of securities in any 12-month period may use Form SB1. This form allows you to provide information in a question and answer format, similar to that used in Regulation A offerings, a type of exempt offering discussed on page 19. Unlike Regulation A filings, Form SB-1 requires audited financial statements.

Form SB-2 - To Raise Capital in Any Amount

If your company is a "small business issuer," it may register an unlimited dollar amount of securities using Form SB-2, and may use this form again and again so long as it satisfies the "small business issuer" definition.

One advantage of Form SB-2 is that all its disclosure requirements are in Regulation S-B, a set of rules written in simple, non-legalistic terminology. Form SB-2 also permits the company to:

Provide audited financial statements, prepared according to generally accepted accounting principles, for two fiscal years. In contrast, Form S-1 requires the issuer to provide audited financial statements, prepared according to more detailed SEC regulations, for three fiscal years; and Include less extensive narrative disclosure than Form S-1 requires, particularly in the description of your business, and executive compensation.