b'How to Legally Raise Private MoneyHow you behave will determine whether your activities involve the sale of securities, not how you present them. A very common mistake is that people read the Howey test and decide they will do joint ventures so they can advertise for joint venture partners. Then, they proceed to treat the investors as passive investors, without giving them an active role in the investment. Simply calling an investment a joint venture opportunity without in-vestors having a truly active role, such as a job and a title, is unlikely to pass the scrutiny of a securities regulator, who will most likely deem the investment to be a security. At that point the regulator may cite the pro-moter for selling unregistered securities without qualifying for an exemp-tion from registration. Promissory Notes are Securities, TooPromissory notes are included in the definition of securities under fed-eral and state securities laws. Certain notes with maturity dates of less than nine months are exempt from registration under federal securities laws (see Securities Act, Section 3(a)(3)), but the states are allowed to im-pose their own regulations on the issuance of notes to private investors, even those that are exempt under federal law. Whether notes are considered securities was defined in Reves v. Ernst & Young, 110 S. Ct. 945 (1990). In Reves, the U.S. Supreme Court determined that notes sold to raise capital, where purchasers buy them to earn a prof-it, are considered to be investments in a business enterprise. These are deemed securities. Borrowing money from private investors, those who are not in the lend-ing business, is generally handled under state laws, but it can be tricky to figure out whose laws apply. The law of the state where the investor is located governs securities laws, but the law of the state where the loan collateral is located may also come into play. If in doubt, seek qualified securities counsel where your investor claims residency. Also seek counsel from a mortgage or real estate attorney in the state where the collateral, if any, is located. If there is no collateral, as in a loan that is not secured by real estate, securities laws will most likely be determinative. State usury laws that limit the legal interest rate on certain types of loans may also apply. 38'