Company Guide for Title III Equity Crowdfunding

Equity-based crowdfunding enables entrepreneurs to access investors who are interested in raising capital for their startup or private businesses. Crowdfunding has evolved to become an accessible multidisciplinary means of raising capital for projects that cannot raise funds through traditional means or are not significant enough to gain the attention of banks and venture capitalists.

The SEC released final rules for Title III Equity-based Crowdfunding that will go into effect on May 16, 2016. This article explains and helps companies learn what they need to know to participate in Title III Crowdfunding.

Company Eligibility

All companies are eligible to participate in Title III Equity-based Crowdfunding, except for certain companies, as follows:

  • Foreign issuers not belonging to either the United States, or District of Columbia.
  • Issuers already subject to the reporting requirements of the Securities Exchange Act of 1934 as amended.
  • Investment funds including other funds that aren't specifically defined as investment funds
  • Any issuer that the SEC has deemed inappropriate to participate in crowdfunding transactions including:
    • Issuers that haven't filed annual reports required by crowdfunding regulations for two years.
    • Issuers without a specific business plan and indicate their business plan is to engage in a merger or acquisition.

Offering Requirements

The recently adopted SEC crowdfunding regulations place certain requirements on offerings that affect investor and issuer participation. Some of the requirements include subjecting individual investors to limits placed on investments, as well as limits placed on the amount of capital an issuer can raise, as follows:

  • Over a 12-month period, individual investors are limited to invest the aggregate across all crowdfunding offerings:
    • $2,000 or 5% of their net worth if their annual income is less than $100,000
    • 10% of their net worth, if their annual income exceeds $100,000, with a maximum investment amount of $100,000
  • Over a 12-month period, a company may raise the following capital from everyday investors:
    • $1 million through crowdfunding offerings. All offerings and transactions must take place through an SEC-registered crowdfunding portal.

Financial statements that issuers are required to submit to the SEC depend heavily upon the offering amounts which are as follows:

  • For offerings $100,000 or lower, financial statements can be filed solely by the principal executive officer.
  • For offerings over $100,000 but lower than $500,000, financial statements must be reviewed by a public accountant, but not necessarily audited.
  • For offerings over $500,000 but not exceeding the $1,000,000 maximum amount:
    • If this offering is the issuer’s first offering under the Regulation Crowdfunding requirements, then financial statements are required to be reviewed by a public accountant, but not necessarily audited.
    • If this offering is not the issuer’s first offering under the Regulation Crowdfunding requirements, then financial statements are required to be reviewed and audited by a public accountant.

SEC Disclosure

Issuers are required to disclose specific information via Form C, to make general information about their company and financial state available to the SEC, investors, and general public. Issuers are required to file:

  • Form C: An initial offering statement, as well as an initial disclosure of information.
  • Form C-U Progress update: If the crowdfunding portal does not provide regular public updates on its website for the issuer, the issuer will be required to be file regular updates regarding the progress of meeting the target offering amount.
  • Form C-A: An optional form, only required if issuers are seeking an amendment to a previously filed Form C.
  • Form C-AR: An annual report required by Section 4A(b)(4).
  • Form C-TR: An optional report, only required when issuers decide to provide notice of the suspension of the duty to file reports required by the SEC.

As a professional SEC filing agent, Colonial can help you file your crowdfunding and other filings to the SEC.


Equity-based crowdfunding is greatly advantageous to issuers, as it creates an innovative and effective means of raising capital. Crowdfunding greatly reduces costs for issuers, as well as allowing capital to be raised much more quickly than traditional methods. This allows companies exposure to a larger audience, and therefore increases the number of potential investors and capital.

  • Equity-based crowdfunding can raise over 40 times more capital per company compared to other forms of crowdfunding.
  • Non-accredited investors are able to invest in crowdfunding.
  • Regulations provide investor protection, reducing risks for issuers and investors alike.
  • New online systems for crowdfunding are cost effective and vastly save time.
  • Reduces hardships for issuers when attempting to raise capital.
  • An increase in issuers results in increased competition, which results in a lower loss in capital for all issuers
  • In addition to raising money, issuers can benefit from many other resources associated with crowdfunding.


Crowdfunding is an excellent means of generating higher amounts of capital for startups and small businesses that cannot raise money through traditional means or are not significant enough to gain the attention of banks or investors on their own. As an SEC registered transfer agent and SEC filings provider, Colonial can be relied on by issuers for their crowdfunding compliance needs. Here are some of the benefits of using Colonial:

  • As a professional stock transfer and SEC filing agent, Colonial can handle all of your transfer agent and SEC filings under one umbrella, making it easy for companies to stay in compliance with the SEC.
  • Electronic/book-entry shares allow issuers to save significantly on startup and on-going shipping and processing fees with the elimination of physical stock certificates.
  • Issuers can rely on the safe harbor exemption when they engage Colonial as a transfer agent, limiting potential liability from regulators and investors.
  • Provide your investors peace of mind, knowing that an independent professional transfer agent that has been in business for nearly 30 years is managing your stock. This should greatly increase your ability to attract investors.

Learn more or obtain a quote by contacting us at the top of the page.

View the final crowdfunding rule 33-9974.

Published: February 17, 2016

Author: Dan Carter