There are three ways to obtain a prospectus for an IPO, or S-1 offering of stock. The easiest way is to pay someone, such as an attorney or a consultant who specializes in Securities and Exchange Commission disclosure documents, to write one for you. That is the most expensive way. You can buy a template online or take an online prospectus and rewrite it for your own use, or you can use SEC Form S-1 Registration Statement Under The Securities Act Of 1933 and write it from scratch.
If you do not have the luxury of spending approximately $15,000 to $35,000 or more to have an attorney or consultant write your prospectus, the best way is to use a prospectus from a company similar to yours, which you can find online in the SEC's EDGAR database, as a guide to how you should fill out Form S-1, and then pass it by an experienced SEC attorney or Public Company Accounting Oversight Board (PCAOB) accountant to make sure all the legalities and disclosures are covered. A prospectus is a serious document that must be in good form or it can cause big problems.
The best preparation for writing a prospectus is writing a business plan. The S-1 form requires, among other things, a description of the business, statement of how you plan to use the proceeds of the funding, management's discussion of the financial condition of the company and a list of key management personnel, including board members, along with their professional career information. Writing a business plan will include these things and help you identify potential threats that should be included in your disclaimer section.
What You Should Know
All the disclaimers you see in a normal prospectus should give you an idea how important it is to take great care in producing your own prospectus. In fact, writing a prospectus or S-1 without an attorney or accountant to assist you is unwise. Above all, do not include any hyperbole or projections that stem from wishful thinking. Always underestimate your revenues and over-estimate your expenses. In the disclosure section, include absolutely everything that could negatively affect your company, including the fact that the offering may not raise enough money.
Print out Form S-1 and read everything, even if you don't understand it. The format for your prospectus begins on page 4 under "Part I—Information Required In Prospectus," which is deceptively simple. In "Part II—Information Not Required In Prospectus" the SEC asks for additional information in the registration statement that you are not required to include in your prospectus, but it is better for this information to be included if it in any way is negative or modifies any of the information included in Part I. If in doubt, include it in the prospectus and let your attorney remove it.
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