The Form C is an offering statement filed by businesses looking to raise capital from accredited and non-accredited investors through online crowdfunding without all of the responsibilities that come with registering the offer and sale of securities with the SEC. Crowdfunding is a method of raising money by soliciting investment from a large number of people, often through the Internet (think of Kickstarter). This allows more business owners to raise capital, and allows anyone to invest in eligible small businesses, start-ups, or newly created businesses.
Regulation Crowdfunding
This sort of crowdfunding is relatively new, with the SEC ruling implementing Form C only going into effect in 2016 under Regulation Crowdfunding (Title 17 §227). Regulation Crowdfunding allows both issuers and investors to leverage the connectivity of the Internet to provide investment opportunities to businesses that would otherwise not be able to deal with the regulatory and financial burden of selling securities, and to investors that would have not previously had the opportunity or funds to become an investor in a small business on their own.
Form C is used for the offering statement as well as any related amendments (Form C/A) or progress reports (Form C-U) to that offering statement. Materials disclosed in the form help investors make an educated decision before putting their money into the company. The form includes issuer information such as the physical address of the issuer and the intermediary selected for the campaign, specific information about the offering like the price per security and the target amount to be raised, and basic financial information of the issuer. Issuers that have sold securities through a Regulation Crowdfunding offering must submit an annual report (Form C-AR) to the SEC, no later than 120 days following the fiscal year end. The report must also be posted on the website of the issuer. Issuers must also abide by state laws regarding crowdfunding and the issuing of securities. Each state regulator enforces Blue Sky laws, which regulate the sale of securities and vary from state to state.
By submitting a Form C, filers are claiming that they are planning to raise money through a crowdfunding campaign and are exempt from registering their business’s securities with the SEC. Form C filers do not have the same obligations for submitting financials, and first-time filers do not need to have their financial reports audited by an independent public accountant. The level of independent review required depends on the amount of the offering as well as first-time filer status.
Issuer and Investor Restrictions
There are a number of key restrictions to know about when starting a crowdfunding campaign:
- Issuers cannot raise over $1,070,000 in any 12-month period (including amounts sold by associated entities). If you are looking to raise more than that amount, look into Form D. Unlike Form C filers, Form D filers are only permitted to raise funds from accredited investors.
- All crowdfunding must be conducted through a single online platform. The website must be an intermediary broker-dealer or a funding portal and must be registered with the SEC and FINRA. Before Regulation Crowdfunding went into effect, only registered broker-dealers had the authority to conduct similar offerings.
- In advertising the offering, issuers must release a notice containing basic facts about the company and offering. No other public advertising is allowed; however, issuers may communicate with potential investors through their intermediary’s platform and must identify themselves as the issuer if they do so.
There are also restrictions for investors looking to buy into companies that file Form C. These restrictions limit how much individuals can invest and are based on income and net worth. The table below from the SEC illustrates these limits:
Investor Annual Income |
Investor Net Worth |
Calculation |
Investment Limit |
$30,000 |
$105,000 |
Greater of $2,200 or 5% of $30,000 ($1,500) |
$2,200 |
$150,000 |
$80,000 |
Greater of $2,200 or 5% of $80,000 ($4,000) |
$4,000 |
$150,000 |
$107,000 |
10% of $107,000 ($10,700) |
$10,700 |
$200,000 |
$900,000 |
10% of $200,000 ($20,000) |
$20,000 |
$1,200,000 |
$2,000,000 |
10% of $1,200,000 ($120,000), subject to $107,000 cap |
$107,000 |
When viewing the table, please note that spouses can calculate their net worth and annual income jointly. Shares purchased through a Regulation Crowdfunding offering cannot be resold within one year of purchase unless they are transferred and meet certain requirements.
Filing Solutions
Regulatory requirements are constantly changing, and it’s important to make sure you always have the capabilities to meet those needs. Our Transform filing software allows you to fill out, validate, and file your Form C all on one intuitive platform. If you are looking for a service provider for your Form C (or any other SEC filing needs) feel free to reach out to schedule a demo.
For more information about Form C and other Regulation Crowdfunding options, please see the following sources:
Regulation Crowdfunding: A Small Entity Compliance Guide for Issuers
