crowdfund, regulation a+

Take Advantage Of Regulation A+

With the new SEC JOBS Acts just around the corner aimed at Equity Crowdfunding your company needs to know the rules and regulations.  In less than 60 days, this new paradigm will allow a small business to raise a Tier 1 up to $20 million per year from non-acredited investors and Tier 2 can raise up to $50 Million per year.

Before you start getting the idea that this will be an easy endeavor, your business needs to know what you should be doing right now in order to take advantage of this.

Regulation A+ is a direct sale of securities in your company.

The SEC guidelines are a 453 pages of rules and regulations.  Regulation A+ is a direct sale of securities in your company.

With tens of millions of potential investors in the Crowd Raise Arena ready to jump in, here are a quick 6 things your company should be doing now in order to proceed in Equity Crowdfunding (ECF).

6 Things To Do Now for Regulation A+

  1. Your Company should be incorporated or form an LLC.

    • You cannot raise funds under Regulations A+ as an individual. An Incorporated entity or LLC are the only ways to sell ownership interests or stock.
  2. Ensure your company has correct structure.

    • In order to sell equity to investors, your company should have been set up correctly. Get advice from a lawyer for this undertaking as there are numerouse legal pitfalls. If this is not done correctly, such as setting up special class of shareholders, for a Regulation A+ offering,  your company is in jeopardy of legal action being taken against it.
  3. Know which Tier level you are going to are going to take.

    • There are two tier levels to Raise capital under the Regulation A+
      • Tier 1 :  you can raise up to $20 Million in a mini-IPO without a required auditing of financial statements. There is no limit on the amount on the amounts raised from non-accredited investors and for the most part no on-going reporting to the SEC. The drawback is that you have to comply with “Blue Sky” laws of every state in which you plan to raise money.   This is not an attractive process as complying to 50 States securieties  makes a nation capital raise of this sort very unappealing.  This would make sense only if you plan on raising funds raising fund in a limited geographic area.
      • Tier 2 : allows you to raise up to $50 million, without the need for blue-sky laws compliance, but it has more regulations and guidelines that need to be addressed before a company rushes into this mini-IPO. Any Company in Tier 2 must have two years of audited financials, this is a costly exercise. Tier 2 investors can only invest 10 percent of income or net worth. There is will also be ongoing reporting to the SEC needed after funds are raised. Tier 2 will appeal to the majority of new companies and start-ups as the expense of auditing will not be so great.
  1. Get Your Financial Reports in Order.

    • You need to have at 2 years of audited financial statements done by an independent CPA. You should start to get your books in order now, regardless of the Tier level you are hoping to launch your Crowd Investing on. Both Regulation A+ processes require this.
  2. Ensure your Directors and Members can pass “bad actor” background

    • Ensure all your board members, officers, directors and major shareholders can undergo an investigation as “bad actors“ by the SEC. If you have members of your team that have had legal trouble or securities regulatory issues they may need to be replaced.
  3. Protect Your (IP) Intellectual Property

    • Intellectual Property needs to be in order and protected. You are going toned to disclose publically a lot of sensitive information. If you need to patent technology or business process these patents should be filed and in place. You do not need someone stealing your idea.  Register your trademarks, products , logos and services where available.