A 504 stock offering can be an effective way for small companies to raise capital (see "504 Offering Opens the Door," [Article link]) without having to follow the Securities and Exchange Commission's complex and sometimes onerous regulations.

"There's just one simple parameter," explains Richard Yanofsky, a securities lawyer with Sherburne, Powers & Needham, PC, in Boston. "The company must raise $1 million or less. That's it. In general, if you're raising only that much, you can sell to any number of people. You can even advertise the sale. And all you have to do is file with the SEC one simple, fill-in-the-blanks document."

Some states do require additional filings, which can add to the paperwork and cost, and some states restrict your ability to advertise, as well as how many people you can sell to. So it pays to look into regulations on a state-by-state basis. But Yanofsky emphasizes that 504s are still "the least costly, most flexible way for a small company to carry out a small stock offering."

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