Capital Raise Drafting

Private Placement Memorandum and Regulation D Offering Documents, Drafted Before Your First Investor Signs

A private placement memorandum (PPM) is the disclosure document a private company, real estate syndication, or fund gives investors when it sells securities without SEC registration, usually under Rule 506 of Regulation D. It sets out the terms, the business, the use of proceeds, the fees and conflicts, and the risks, so the issuer can show every material fact was disclosed before the money came in. We draft the PPM and the papers that travel with it. The issuer and its counsel review, adopt, sign, and file.

The short answer

You need a PPM when you sell under Rule 506(b) to any non-accredited investor (Rule 502(b) requires the disclosure), and you want one whenever you raise from outside investors, because Rule 10b-5 and Section 17(a) reach material misstatements and omissions whether or not a disclosure document was required.

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Updated 2026-09-28Regulation D rules checked against 17 CFR 230.501 to 230.508

Rule 501 · 502 · 503 · 506

PPM, subscription agreement, questionnaire, operating agreement, Form D data

Before You Raise

When a Company Needs a PPM Before It Takes Investor Money

Selling membership units, shares, notes, or limited partnership interests to outside investors is selling a security, and Section 5 of the Securities Act requires registration unless an exemption applies. A real estate deal where passive investors put in money and the sponsor does the work fits the definition of an investment contract the Supreme Court set out in SEC v. W.J. Howey Co., 328 U.S. 293 (1946): money invested in a common enterprise with profits expected from the efforts of others. Most private raises rely on Section 4(a)(2) and its Regulation D safe harbor, Rule 506.

The PPM is mandatory in one situation. Rule 502(b)(1) requires an issuer selling under Rule 506(b) to furnish specified information to every purchaser who is not an accredited investor a reasonable time before sale, including financial statement information keyed to Form 1-A, and Rule 502(b)(2)(v) requires giving each purchaser the chance to ask questions before buying. If all purchasers are accredited, no disclosure document is prescribed.

Optional is not the same as safe. The note to Rule 502(b)(1) tells issuers to consider giving the same information to accredited investors "in view of the anti-fraud provisions of the federal securities laws." When a deal goes badly, investors and regulators ask what was disclosed. A written memorandum delivered before the subscription is the answer. We draft that memorandum for founders raising a seed or growth round, sponsors syndicating real estate, and managers launching a private fund.

Choosing the Exemption

Choosing Rule 506(b) or Rule 506(c): The Exemption Your PPM Is Written Around

Every section of the memorandum depends on which Rule 506 path the issuer takes, so we settle it first. Under Rule 506(b), the issuer cannot use general solicitation or general advertising (Rule 502(c)), may sell to an unlimited number of accredited investors, and may add up to 35 non-accredited purchasers in any 90-calendar-day period, each of whom must, alone or with a purchaser representative, have the knowledge and experience to evaluate the investment. The issuer may rely on a reasonable belief that an investor is accredited.

Rule 506(c) lifts the advertising ban. In exchange, every purchaser must be accredited and the issuer must take reasonable steps to verify it. The rule lists non-exclusive methods: reviewing IRS forms for two years of income, reviewing asset statements and a consumer report dated within three months for net worth, or a written confirmation from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney, or a certified public accountant. The SEC states that a checked box alone, with nothing else known about the investor, satisfies neither standard.

In March 2025 the SEC's Division of Corporation Finance agreed in a no-action letter that a high minimum investment amount, paired with written representations that the investor is accredited and that the investment is not financed by a third party for this purpose, is a relevant factor in verification. The staff letter is not a rule, and we draft the questionnaire and subscription representations to whichever verification approach you and your counsel adopt. The choice between the two paths is yours; the documents follow it.

What We Draft

The Regulation D Offering Documents We Draft as One Package

Regulation D offering documents have to agree with each other. A preferred return stated one way in the PPM and another way in the operating agreement is a disclosure problem before the first distribution is paid. We draft the package together from one term sheet, so the fee, waterfall, transfer, and voting terms read the same in every document. Each piece can also be ordered alone when your counsel already holds the rest.

Private Placement Memorandum

Cover page with the restricted-securities legends, summary of offering terms, the business or property, use of proceeds, management and track record, compensation and conflicts of interest, capitalization, risk factors, description of the securities, transfer restrictions, investor suitability standards, and subscription procedures.

Subscription Agreement

The contract the investor signs to buy: amount and closing mechanics, the investor's representations on accredited status, investment intent, and receipt of the memorandum, acknowledgment of resale limits, and the issuer's right to accept or reject each subscription.

Accredited Investor Questionnaire

Checkbox and narrative items tied to each category in Rule 501(a), plus the sophistication questions a non-accredited purchaser answers under Rule 506(b)(2)(ii), and, for a 506(c) raise, the document request list that supports verification.

Operating Agreement or Limited Partnership Agreement

The governing document of the investing entity: capital accounts, distributions and the waterfall, manager or general partner authority, fees, removal rights, transfer restrictions, reporting, and dissolution. Drafted to match the PPM term for term.

Form D and State Notice Data Sheet

Every Form D item assembled from the deal documents: issuer and related persons, industry group, exemption claimed, offering amounts, sales compensation, and use of proceeds for related persons, plus a state-by-state list of where sales were made, so the issuer or its counsel can file.

Bad Actor Questionnaires

Certifications for each person Rule 506(d) covers, drafted so the issuer can show the factual inquiry the rule's reasonable care exception requires, with a disclosure schedule for any pre-September 23, 2013 events Rule 506(e) says must be described.

Investor Deck Consistency Review

A side-by-side read of your pitch deck, one-pager, and website against the PPM, so the numbers, projections, and fee descriptions investors see in marketing are the numbers the memorandum discloses.

Supplements and Amendments

Supplements when material facts change mid-raise, a new tranche opens, or terms move, with a redline so investors who already received the memorandum can see what changed.

Send Us Your Term Sheet and DeckNeed board consents or bylaws for the raise? Corporate governance drafting.

Investor Paperwork

Subscription Agreement and Investor Questionnaire: Where Accredited Status Is Proved

The subscription agreement is where the exemption is documented investor by investor. Rule 501(a) counts a person as accredited if they fall within a category, or if the issuer reasonably believes they do, at the time of sale. The questionnaire captures which category, and the subscription agreement turns those answers into signed representations the issuer can rely on. For a 506(b) raise that includes non-accredited purchasers, the questionnaire also records the sophistication showing Rule 506(b)(2)(ii) requires.

Rule 502(d) adds resale limits. The securities are restricted, and the issuer shows reasonable care by asking whether the purchaser is buying for itself, giving written disclosure that the securities are unregistered and cannot be resold without registration or an exemption, and placing a legend on the certificate or other evidence of ownership. We build all three into the subscription package. The six accredited investor categories we see most are below.

Net worth

Over one million dollars, alone or jointly with a spouse or spousal equivalent, not counting the primary residence as an asset (Rule 501(a)(5)).

Income

Over two hundred thousand dollars individually, or three hundred thousand dollars jointly, in each of the two most recent years, with a reasonable expectation of the same this year (Rule 501(a)(6)).

Professional license

A natural person holding in good standing a certification the SEC designates, currently the Series 7, Series 65, and Series 82 licenses (Rule 501(a)(10)).

Insiders of the issuer

Directors, executive officers, and general partners of the issuer or of its general partner (Rule 501(a)(4)).

Entities by size

Corporations, partnerships, LLCs, business trusts, and 501(c)(3) organizations with total assets over five million dollars, and other entities owning investments over five million dollars, if not formed to buy these securities (Rule 501(a)(3), (a)(9)).

All-accredited entities

Any entity in which every equity owner is an accredited investor, looking through to the natural persons (Rule 501(a)(8)).

Rule 501(a) also covers banks, registered brokers and advisers, insurance companies, certain trusts, family offices and their family clients, and knowledgeable employees of private funds. We map each investor type in your raise to its category in the questionnaire.

Disclosure and Liability

How We Draft Risk Factors With Rule 10b-5 in Mind

An exemption from registration is not an exemption from fraud liability. Rule 10b-5 makes it unlawful, in connection with the purchase or sale of any security, to make an untrue statement of a material fact or to omit a material fact needed to keep the statements made from being misleading. Section 17(a) of the Securities Act reaches the same conduct in the offer or sale of securities. State securities laws carry their own anti-fraud rules, and Section 18(c) of the Securities Act preserves state power to bring fraud enforcement actions.

A second exposure comes from losing the exemption itself. Section 12(a)(1) lets a purchaser recover the price paid, with interest, from anyone who sold a security in violation of Section 5. If a 506(b) raise used general solicitation, or a 506(c) raise sold to someone never verified, the exemption can fail, and Rule 508 treats a general solicitation failure as significant to the whole offering.

Risk factors are the part of a private placement memorandum that does the most work when an investment loses money. Boilerplate that warns about "general economic conditions" protects little. Specific risks tied to this business, this property, this loan, and this sponsor are what show investors were told.

We draft risk factors from your documents: the loan maturity and rate terms, key-person dependence, concentration in one tenant or customer, the absence of an operating history, conflicts where the sponsor earns fees, and the illiquidity of restricted securities. Projections are labeled with their assumptions, and cautionary language sits next to them rather than twenty pages away.

A closing date set and no memorandum yet?

Send the term sheet, the deck, and the target closing. We return scope and a delivery date in one business day and draft the package to your exemption and your deal.

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Deal Types

Real Estate Syndication PPM, Fund Offerings, and Startup Rounds

A real estate syndication PPM is built around one property or a defined acquisition plan. Investors buy membership interests in an LLC or limited partnership interests that own the asset, and the sponsor manages it. The memorandum describes the property, purchase price and financing, the business plan and hold period, and the waterfall: preferred return, return of capital, and the sponsor's promote, along with acquisition, asset management, refinance, and disposition fees. The investing entity's LLC operating agreement has to carry the same waterfall word for word, and we draft the two together.

A private fund PPM covers a blind or semi-blind pool: the strategy, investment limits, the management fee and carried interest, capital calls and default remedies, key-person terms, and the limited partnership agreement. Funds usually rely on an exclusion from the Investment Company Act. Section 3(c)(1) covers an issuer whose securities are beneficially owned by not more than one hundred persons (two hundred fifty for a qualifying venture capital fund) that is not making a public offering; Section 3(c)(7) covers an issuer owned only by qualified purchasers. The PPM, the questionnaire, and the transfer provisions must protect the exclusion the fund's counsel selects.

A startup raise sells preferred stock, common stock, a convertible note, or a SAFE. The memorandum is often shorter, and the weight shifts to the capitalization table, dilution, the rights attached to the new security, and the risks of an early-stage company. When the round also needs a shareholder agreement among the founders and investors, we draft it to match the PPM. Tax sections in any variant are written with, or confirmed by, your tax adviser.

Disqualification

Bad Actor Questionnaires We Draft Before the First Sale

Rule 506(d) takes the exemption away if a covered person has a disqualifying event. Covered persons include the issuer and its predecessors and affiliated issuers; directors, executive officers, other officers participating in the offering, general partners, and managing members; owners of twenty percent or more of the voting equity; promoters; the investment manager of a pooled fund; and anyone paid to solicit investors, with their own principals. Rule 504(b)(3) applies the same disqualification to Rule 504 offerings.

Disqualifying events include a securities-related criminal conviction within ten years (five for the issuer and its predecessors and affiliated issuers), certain court injunctions within five years, final orders of state securities, banking, and insurance regulators, SEC disciplinary and cease-and-desist orders, suspension from a securities exchange or association, and Postal Service false representation orders. Events before September 23, 2013 do not disqualify, but Rule 506(e) requires the issuer to describe them in writing to each purchaser a reasonable time before sale.

The rule excuses an issuer that did not know and, with reasonable care, could not have known of a disqualification, and its instruction says reasonable care requires a factual inquiry. That inquiry is a paper exercise, and we draft it: a questionnaire for each covered person, a certification, and a disclosure schedule for any older event that belongs in the PPM.

After the First Sale

Form D Timing and State Blue Sky Notices We Prepare the Data For

Form D is a notice, not an application. Rule 503(a) requires an issuer relying on Rule 504 or 506 to file it no later than 15 calendar days after the first sale, rolling to the next business day if the deadline lands on a weekend or holiday. The SEC treats the first sale as the date the first investor is irrevocably contractually committed, which can come well before the money is wired. The notice is filed on EDGAR, which requires the issuer to have EDGAR access, and the SEC charges no filing fee for it.

Amendments are required to correct a material mistake, to reflect certain changes such as a total offering amount raised by more than ten percent, and annually while the offering continues (Rule 503(a)(3)). A court order enjoining the issuer for failing to file Form D disqualifies it from Rules 504 and 506 under Rule 507.

Rule 506 securities are covered securities under Section 18(b)(4)(F) of the Securities Act, so states cannot require registration, but they keep the power to require notice filings and collect fees, and most do. Rule 504 offerings are not preempted and need state registration or a state exemption. We prepare the Form D data sheet and a list of the states where sales were made. The issuer, or its counsel, signs and files the Form D and each state notice.

Other Exemptions

When Rule 504, Regulation Crowdfunding, or Regulation A Fits Better Than a Rule 506 Raise

Rule 506 is the default for private raises because it has no dollar cap and preempts state registration. The other routes trade those features for access to the general public. Rule 504 is capped at ten million dollars in twelve months. Regulation Crowdfunding caps a company at five million dollars in twelve months, runs through a single registered intermediary, and limits what each non-accredited investor may put in. Regulation A permits a public offering of up to twenty million dollars (Tier 1) or seventy-five million dollars (Tier 2) in twelve months after the SEC qualifies an offering statement. The table is the frame we start from when a client is still choosing; the choice itself belongs to the issuer and its securities counsel.

Route	Offering cap	Who can invest	Advertising	Disclosure	State law
Rule 506(b)	No limit	Unlimited accredited; up to 35 sophisticated non-accredited in any 90 days	No general solicitation	Rule 502(b) information to non-accredited purchasers	Preempted; notice filings and fees
Rule 506(c)	No limit	Accredited only, with reasonable steps to verify	General solicitation allowed	None prescribed; anti-fraud rules apply	Preempted; notice filings and fees
Rule 504	Ten million dollars in 12 months	Any investor	Restricted unless state conditions are met	None prescribed federally	Not preempted; state registration or exemption
Regulation Crowdfunding	Five million dollars in 12 months	Anyone, with per-investor limits for non-accredited	Through one registered intermediary's platform	Form C	Preempted
Regulation A	Tier 1 twenty million dollars; Tier 2 seventy-five million dollars in 12 months	Public offering	Allowed	Offering statement on Form 1-A, qualified by the SEC	Tier 1 state review; Tier 2 preempted

Sources: 17 CFR 230.504, 230.506, 230.251(a), and 227.100(a); Securities Act Section 18(b)(4).

Checklist

What to Gather Before We Draft Your Offering Memorandum

You do not need everything to start. Send what you have and we will list what is missing and which sections depend on it. Upload through the secure matter portal rather than email, since offering materials and investor information are confidential.

1Formation documents for the issuer and any manager or general partner entity: certificate of formation, current operating or partnership agreement, and cap table.
2The term sheet or deal summary: security type, price or unit value, minimum investment, raise size, closing dates, and any tranches.
3The investor pitch deck, one-pager, and anything already posted on a website or sent to prospects.
4Financial statements and projections, and for real estate the purchase agreement, rent roll, loan term sheet, and budget.
5Biographies and track record of the principals, with any prior deals you plan to describe.
6Every fee, promote, and related-party payment the sponsor or its affiliates will receive.
7Whether you intend to advertise (506(c)) or raise only from people you already know (506(b)), and whether any non-accredited investors are expected.
8Names of every director, officer, managing member, twenty percent voting owner, promoter, and paid solicitor, for the bad actor inquiry.
9The states where you expect investors to live.
10Your securities counsel's and tax adviser's contact details, if you have them, so their comments can be built into the draft.

You Adopt, You File

We Draft the Offering Package; the Issuer and Its Counsel Adopt and File It

Legal Tank is a drafting service, not a law firm, a broker-dealer, or an investment adviser. We serve sponsors and founders who want a first draft built from their own deal, and securities counsel who want the drafting done for their review. We do not give securities, tax, or investment advice, recommend an exemption, solicit or introduce investors, or file anything. The issuer decides what the memorandum says and who receives it.

Legal Tank

Reads the term sheet, deck, entity documents, and financials.
Drafts the PPM, subscription agreement, questionnaire, and governing agreement to one set of terms.
Drafts bad actor questionnaires and the Form D data sheet.
Revises to your counsel's comments and drafts supplements mid-raise.

The issuer and its counsel

Choose the exemption and confirm the offering structure.
Review, adopt, and deliver the memorandum to investors.
Verify investors and accept or reject subscriptions.
Sign and file Form D on EDGAR and the state notices.

Raising alongside ordinary business contracts, such as vendor or customer agreements? See contract drafting services. If the deal is a joint venture between two sponsors rather than a raise from passive investors, start with a partnership agreement between the principals. For any other filing or agreement, see custom legal document drafting.

FAQ

Questions Sponsors Ask About a Private Placement Memorandum

What is a private placement memorandum?

A private placement memorandum is the disclosure document a company or fund gives prospective investors in an offering that is exempt from SEC registration, most often under Rule 506 of Regulation D. It describes the securities being sold, the business or property, the people running it, how the money will be used, the fees and conflicts, and the risks. It works alongside the subscription agreement, which is the contract the investor signs, and the investor questionnaire, which records why each investor qualifies. The memorandum is not filed with or approved by the SEC. Its job is to put the material facts in writing before anyone invests, so the issuer can show later that investors were told.

Is a PPM legally required for a private placement?

Not in every case. Under Rule 502(b)(1), an issuer selling under Rule 506(b) must furnish specified disclosure to any purchaser who is not an accredited investor a reasonable time before sale, and that disclosure is usually delivered as a PPM. If every purchaser is accredited, Regulation D does not prescribe a disclosure document. The rule's own note adds that an issuer should consider giving the information to accredited investors as well, because the anti-fraud provisions still apply. Rule 10b-5 and Section 17(a) of the Securities Act reach misstatements and omissions in any offering, so most sponsors deliver a PPM even when every investor is accredited.

What is the difference between Rule 506(b) and Rule 506(c)?

Rule 506(b) prohibits general solicitation and advertising, allows up to 35 non-accredited purchasers in any 90-calendar-day period if each one, alone or with a purchaser representative, is financially sophisticated, and lets the issuer rely on a reasonable belief that an investor is accredited. Rule 506(c) allows general solicitation, but every purchaser must be accredited and the issuer must take reasonable steps to verify that status. Rule 506(c)(2)(ii) lists non-exclusive methods: reviewing tax forms for income, reviewing asset statements and a consumer report for net worth, or obtaining a written confirmation from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney, or a certified public accountant. Both paths allow an unlimited offering amount.

Who counts as an accredited investor?

Rule 501(a) defines the term. For individuals, the common tests are net worth over one million dollars, alone or with a spouse or spousal equivalent, excluding the primary residence; or income over two hundred thousand dollars (three hundred thousand dollars jointly) in each of the two most recent years with a reasonable expectation of the same this year. Holders in good standing of the Series 7, Series 65, or Series 82 license qualify, as do directors, executive officers, and general partners of the issuer. Many entities qualify with total assets or investments over five million dollars when not formed to make the investment, and any entity whose equity owners are all accredited qualifies.

Do I have to file a PPM with the SEC?

No. The SEC does not review or approve a private placement memorandum, and the memorandum itself is not filed. What the issuer files is Form D, a notice of the offering, due no later than 15 calendar days after the first sale under Rule 503(a), with the first sale being the date the first investor is irrevocably committed. Form D is filed electronically on EDGAR, carries no SEC filing fee, and must be amended for material mistakes, for certain changes, and annually while the offering continues. Many states then require their own notice filing and fee for Rule 506 offerings sold to their residents. The issuer or its counsel files; we prepare the data.

Can I write my own private placement memorandum?

Nothing in Regulation D requires a lawyer to write the memorandum, and some sponsors assemble their own from a template. The risk is that a template describes someone else's deal. Liability under Rule 10b-5 and Section 17(a) turns on untrue statements of material fact and on omissions that make what was said misleading, so generic risk factors, a use of proceeds that does not match the budget, or a fee left out of the summary are exactly where claims start. We draft the memorandum from your actual deal documents, and it returns to you and your securities counsel to review, adopt, and deliver. We do not give securities, tax, or investment advice.

What goes into a real estate syndication PPM?

A real estate syndication PPM describes the property or acquisition strategy, the purchase terms and financing, the business plan and projected hold period, the sponsor's track record, and the capital stack. It spells out the waterfall: preferred return, return of capital, and the sponsor's promote, along with acquisition, asset management, and disposition fees. The risk factors cover debt, interest rate and refinancing risk, tenant and market risk, illiquidity, and conflicts where the sponsor or its affiliates earn fees. The PPM is paired with the operating agreement of the investing entity, a subscription agreement, and an investor questionnaire, and the terms in all of them have to match line for line.

Ready When You Are

Get the PPM Drafted Before the First Subscription Comes In

Send the term sheet, the deck, the entity documents, and the exemption you expect to use, and we will scope the private placement memorandum and every document that goes with it. We return scope and a delivery date in one business day, and the draft comes back for you and your counsel to review, adopt, and deliver.

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