Are you forming a limited liability company (LLC) or a limited partnership (LP) in Arizona? Do you anticipate issuing ownership interests at the time of formation? If the answer to these questions is yes, then effective August 6, 2016, the offer and sale of those ownership interests may be exempt from registration under Arizona’s blue sky laws.

Arizona’s blue sky laws, namely the Arizona Securities Act (the Act), require any securities offering to be registered before those interests are sold or offered for sale within or from Arizona, unless the security or the transaction is exempt from the Act’s registration requirements.

Prior to August 6, organizers of a corporation could issue shares to up to 10 “incorporators” if (1) they did not intend to sell those shares to others and (2) the shares are in fact not directly or indirectly sold to a third party within 24 months, unless there is a change of financial circumstances.

This exemption is known as the “Incorporator Exemption”. It did not help owners of LLCs or LPs, however, until now.

Beginning August 6, 2016, the Incorporator’s Exemption has been expanded to include the issuance and delivery of securities of a LLC or LP to the original organizers or general partners subject to the same two conditions.

The Incorporator’s Exemption is available only at organization. Therefore, it is crucial to take steps to properly document the initial organizers’ status as “original incorporators, organizers, or general partners” prior to organizing the company.

The securities attorneys at Jennings Strouss regularly work with Founders in organizing companies, helping them to raise capital in compliance with the securities laws and doing business transactions tailored to individual needs.