What’s a Business Prospectus?

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Technically, a business prospectus is a document produced by a company that describes the securities they have available for purchase or trading. These documents were written for the US Securities and Exchange Commission (SEC) to review and approve before a securities sale can begin. In actual usage, a business prospectus is also a document detailing a company’s financial situation and future goals. While the first definition is a very specific legal document, the second definition has a very vague and broad meaning.

In the US, a business prospectus is prepared by a company to finalize its securities offerings. This document is often distributed to potential buyers as an alert to the upcoming sale, but its real purpose is to notify the SEC of the sale. The SEC will review the document and determine whether the information is accurate and whether the sale is permissible. If all goes well, the SEC approves the sale and the securities hit the market. While this is the process in the US, the actual use of a business prospectus in other countries is generally very similar.

The business prospectus contains the company’s upcoming securities offerings, but also has additional information. It is this other piece of information that has slowly broadened the definition of the term and brought it into other areas of business. In addition to upcoming offerings, readers will find information about the current financial situation of the business, information about key employees, notices of any major layoffs, hires, or terminations, and disclosure of any legal matters in which the company is involved.

All of this additional information is designed to allow potential buyers to make an informed decision about purchasing the business. When buyers see last year’s quarterly earnings and the hiring of new employees, it shows that the company’s stock is likely rising. Due to the regulation of the document, it also shows bad aspects so that the company as a whole can be represented.

With all this additional information, the actual definition of what was and was not a prospect became blurred. Some companies use their annual report as a business prospectus, which means it includes press releases and development data. Others use the term to mean your business plan and the structure and organization of the business as a whole.

While any or all of these definitions may apply, there is one thing that needs to be present in a business prospectus. Every prospect needs information relating to public and private security offerings made by the company. This information is what makes the document a prospectus; everything else is optional.

Asset Smart.

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