Fundraising is an integral part of the startup journey. There are many tried and true options when it comes to fundraising, but one of the more exciting avenues is Title III, or otherwise known as Regulation Crowdfunding. Having gone into effect in May 2016 under the JOBS Act, this regulation opens up the pool of potential investors to include ordinary people who didn’t have outrageous incomes. Essentially, more investors mean more options for startups.
What does Title III Include?
There are some limitations when it comes to this particular regulation. The rules include:
- Maximum of 1 million dollars raised in a one-year period.
- Accredited and non-accredited investors may participate.
- An online platform must be used.
- Reporting requirements must be followed.
- You must offer details about the financial information of the business. In some instances, it must also be audited.
- Only U.S. entities are allowed to participate.
Title III Equity Crowdfunding Rules
To appropriately crowdfund under Title III, there are certain restrictions that startups must follow as listed above. Here, we will examine what some of those restrictions indicate.
An established online platform must be used to operate the crowdfunding. Here, investors are provided with adequate information so they can make informed decisions about their investment. Additionally, there must be a broker that operates the platform, and that broker should be properly registered.
The amount of money earned through the Title III operation influences the response of the startup.
- $100,000 or less raised—financial statements must be provided as well as specific information from tax return documents.
- $100,000.01-$500,000 raised—financial statements must be reviewed by an accountant, and the accountant must then report to the company as well as the investors.
- $500,000.01-$1,000,000-The documents must be reviewed by an independent account, and if it is during the second year of funding, then those documents must also be audited.
Assistance with Fundraising
If you would like to learn more about how you can use Title III to increase the fundraising ability of your business, then you should reach out for professional guidance. LawTrades is happy to connect clients with the appropriate lawyer for their needs. We offer a flat-rate payment option or a subscription-based legal plan for clients who may need additional services. Contact us today to schedule your consultation and learn more about the options that suit your situation.