Since the Obama Administration passed the JOBS Act in 2012, startup founders have been taking advantage of regulation crowdfunding (Reg CF) to get their businesses off the ground.

Also called equity crowdfunding, reg CF is a way for up-and-coming entrepreneurs to get investment capital from the crowd to scale up their businesses.

It gives independent start-up founders a lot of freedom to run their businesses while still raising the money they need to move forward.

However, there are limits and requirements to equity crowdfunding. According to government regulations, you can’t raise more than $5 million, and you’ll need to provide financial disclosures depending on how much you receive.

If you’re planning on getting funding for your startup using reg CF, you’ll need to keep track of this information so you can stay compliant with the law.

Let’s break down the equity crowdfunding limits and requirements you need to know so you can get started!

But first, it’s important to note that we at CrowdCrux are not lawyers or accountants. This article is not legal advice and is based on our own research. All information should be double-checked with platforms, portals, and legal counsel.

How Does Regulation Crowdfunding Work?

Briefly, regulation crowdfunding is a way for individuals to raise business capital through investors from the crowd.

Using an equity platform like WeFunder or StartEngine, startup founders can sell securities to both accredited and nonaccredited investors and use the funds raised to grow their businesses. Meanwhile, investors can hope to receive significant returns if the business is successful.

Regulation crowdfunding has a few benefits over the traditional stock market, namely, that it tends to be faster, broadens the potential pool of investors, and allows entrepreneurs to maintain more control over their business operations.

If you’re interested in learning how to do a regulation crowdfunding campaign to scale your business, we recommend checking out Salvador Briggman’s Equity Crowdfunding Explained, which is free with a trial of Audible. Get the free audio book with Audible’s 30-day Free Trial.

This book will help you unpack the intricacies of equity crowdfunding, build your Reg CF checklist, and plan a winning Reg CF marketing campaign. It’s the ultimate guide to getting funding for your startup!

What Are the Reg CF Limits?

How much can you raise with reg CF?

The short answer is $5 million.

This is the maximum amount of money you are allowed to raise through equity crowdfunding platforms, but it gets a little more complicated than that.

 When you launch a reg CF fundraising campaign, you are also required to submit Form C along with financial disclosures to the SEC in order to stay compliant.

Reg CF Requirements by Amounts

The type of financial disclosures to need to provide to the SEC depends on how much money your campaign raises.

Here’s a breakdown of what you need to submit based on the amount you raise.

(Please note that these amounts refer to the sum of your current offer and any previous raises you have completed.)

$124,000 or less

If you raise $124,000 or less, you don’t need to submit your tax returns per se, but you do need to provide some tax information that has been certified by your principal executive officer. If you have any available financial statements, these should be certified and submitted, as well.

$124,000-$618,000

If the total amount of your raise is between $124,000 and $618,000, you must provide financial statements reviewed by a CPA. If any audited statements are available, they should also be provided.

$618,000-$1,235,000

If you raise between $618,000 and $1,235,000, the disclosures you need to submit depend on whether or not you’ve previously sold securities with reg CF.

• If you have NOT previously sold securities with reg CF: you must provide financial statements reviewed by a CPA.

• If you HAVE previously sold securities with reg CF: you must provide financial audited financial statements.

$1,235,000-$5,000,000

If the amount of your raise falls between $1,235,000 and the maximum of $5 million, you’ll be required to submit financial statements that have been audited by a CPA.

Conclusion

If you run your campaign based on best practices, put together a strong marketing strategy, and do what you need to do to stay compliant, raising funds with reg CF could be your ticket to success!

Want to learn more about how to put together the equity campaign your business deserves?

Check out CrowdCrux’s FREE Equity Crowdfunding Course.

This comprehensive course will teach you everything you need to know about raising funds, getting investors, picking the right platform, and more!

It’s the best way to familiarize yourself with the world of reg CF and position yourself for success.

Good luck, and remember, CrowdCrux is here to help!