Base Filing Requirements for Equity Crowdfunding Entrepreneurs

Information Entrepreneurs Must Provide to List an Equity Offering

“It is thrifty to prepare today for the wants of tomorrow.” – Aesop.

Base Equity Crowdfunding Requirements

Base Equity Crowdfunding Requirements

There are dozens of great quotes emphasizing the importance of preparing for tomorrow, and for good reason – they’re all true. There is no better use of the current downtime in the equity crowdfunding world than to continue educating yourself for the enactment of Title III.  Equity crowdfunding entrepreneurs may not be able to open an offering yet, but knowing what information you will need to submit will certainly expedite the process once that day comes.

To provide these details in a clear and concise manner, I have once again tapped the book “Investing in Equity Crowdfunding” (Laczniak, 2012, Chapter 1.3.3, pgs. 14-16). It would be wise to copy this list onto a personal document or print this blog for a hard copy. As a fan of list making (if you couldn’t tell by my blog history) I prefer typing or writing down all assignments and responsibilities and crossing them off as I go. In my opinion, there is no better way to know you have completed 100% of the tasks assigned to you.

To all the future equity crowdfunding entrepreneurs out there, here is a sample of base filing requirements you will need to satisfy:

1.) Only sell up to $ 1,000,000 of securities through equity crowdfunding on an annual basis.

2.) Conduct the equity crowdfunding through a broker or funding portal.

3.) Disclose key business information, including but not limited to: (a) company contact information such as name, legal status, physical address, and website address, (b) names of executives, directors and significant shareholders and (c) a description of the business.

4.) A description of the financial condition of the business, which involves: (a) tax returns and financial statements certified by company executives if the entrepreneur raises less than $ 100,000, (b) financial statements reviewed by a financial accountant if the company raises less than $ 500,000 but more than $100,000 and (c) audited financial statements if the company raises more than $ 500,000.

5.) A description of the uses of funds.

6.) Fundraising target amount and deadline.

7.) The price of the securities being offered.

Make sure you have all your files prepared for the arrival of equity crowdfunding.

Make sure you have all your files prepared for the arrival of equity crowdfunding.

8.) A description of the company’s ownership and capital structure, which includes: (a) terms of the securities being offered as well as the terms of other existing share classes (e.g., how such terms may be modified and a summary of the differences between the securities including how the rights of the securities being offered may be materially limited, diluted or qualified by the rights of any other class of security of the issuer), (b) a description of how the exercise of the rights held by the principal shareholders of the company could negatively impact the purchasers of the crowdfunded equity, (c) the name and ownership level of each existing shareholder who owns more than 20 percent of any class of the securities of the company, (d) how the securities being offered are valued and examples of methods of how the securities may be valued in the future and (e) the risks to purchasers of the securities relating to minority ownership in the issuer and risks regarding additional issuances of shares, a sale of company stock or assets, or another transaction.

9.) An annual filing with the SEC and investors reporting the results of operations and financial statements of the company. (See Section 4A (b) of the Securities Act of 1933.)

It is almost certain the SEC will add some filing requirements to the final ruling, but getting a head start on preparing this information will certainly give you an advantage. The faster you complete the filing demands on a portal, the sooner you can list your offering. It won’t hurt to be one of the first offerings on a platform full of investors, so do your future-self a favor and start preparing this information today.

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Thank you again for reading and leave your comments below!


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