Err on the side of disclosure. Even if you qualify for exemptions to the securities disclosure rules, investors could accuse you of providing misleading assurances. Always suggest that potential investors check with their own financial and legal advisors to evaluate the investment. The bottom line is that, although each investor will assess his or her own degree of risk, you should disclose all the relevant information to them so they can make an intelligent, informed choice.

If you are thinking about equity investors for your business, get Investors in Your Backyard: How to Raise Business Capital from People You Know, by Asheesh Advani (Nolo). It takes you through the entire process of raising business capital -- from developing and pitching a financing plan, to signing the paperwork