Small Business Stock Registration Forms

A company that decides to sell its shares to the public normally must file a registration statement with the Securities and Exchange Commission. Before the company may sell the shares, the staff of the Commission must declare the registration statement effective. The basic registration form (Form S-1) includes two parts, a prospectus or selling document and additional information required by the Commission that is publicly available but does not have to be provided to investors.

Commission rules describe extensive information about various items that must be provided in the standard registration statement. However, small businesses, or those companies that qualify as a "small business issuer," may file a simplified registration form (SB-1 or SB-2) that does not require as much information as the basic registration form. Thus, registration through use of the simplified forms is not as expensive as a normal registration.

A "small business issuer" is defined as a United States or Canadian company issuing stock that had less than $25 million in revenues in its last fiscal year and that has outstanding publicly held stock worth no more than $25 million. If a company qualifies as a small business issuer, it then has the option to file Forms SB-1 or SB-2 to sell stock to the public.

Small business issuers that plan to offer up to $10 million worth of securities to the public within a 12-month period may use the SB-1 form. That form allows the company to provide information in a question-and-answer format and essentially fill in the blanks of the form. This is in contrast to the S-1 basic registration form that requires various narrative statements containing information required by the Commission. Although the SB-1 form is simpler to use, a small business issuer still must include audited financial statements with its registration statement.

Form SB-2 is available for a small business issuer to file and re-use to raise capital above $10 million up to any amount so long as the company remains a small business issuer. Completion of Form SB-2 is considered simpler because Regulation SB which describes what must be disclosed in the form is written in non-legalistic terminology. Form SB-2 is less burdensome by requiring the issuer to provide audited financial statements for only two years rather than the three fiscal years required for basic registration Form S-1. Also, less extensive narrative disclosure is required in Form SB-2 regarding the description of the company's business and executive compensation when compared to disclosure requirements for Form S-1.

Once the commission's staff examines the registration forms filed by the company seeking to go public, the staff will either inform the company that the statement is incomplete or inaccurate and allow the company to file amendments or the staff will declare the registration statement effective. Once the registration statement is declared effective, the company may begin to sell its shares to the public.

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