What is a Form C Filing?
Any companies that intent to engage in Regulation Crowdfunding (also known as Reg CF) must file a Form C with the SEC via EDGAR (Electronic Data Gathering, Analysis, and Retrieval) to be approved before they begin to raise capital or offer terms through Reg CF.
Where do I file my Form C?
As a business using Regulation Crowdfunding, the required Form C should be filed through an intermediary– usually a funding portal or a broker. Funding portals like WeFunder, StartEngine, and Republic will often work with companies to file their Form C, as the disclosures required are public and legally must be made available to any potential investors.
Information Needed to File
Company Information
Companies are required to disclose:
- Your company’s legal name and EIN
- Legal status (date of incorporation, etc.)
- Physical address of the company
- Web address of issuer
This information is typically included on the cover page of your Form C filing, and is used to clearly identify your company for potential investors and the SEC.
Company Executives & Officers
Companies are required to disclose the names of:
- Any company directors and officers (or persons of similar status or function), a description of their job functions and up to 3 years of any work history in a similar capacity.
- Any persons holding more than 20% of the issuer’s shares
This is for the purposes of publicly disclosing all parties involved or effected by the anticipated offering, such as prior investors who may see the value of their securities altered as a result.
Target Goal (min and max) and Deadline
Companies must declare in advance the intended terms, the target amount you intend to raise, and the deadline by which they will end their Reg CF campaign.
If any of these details change later, companies are expected to file an Amendment to your Form C. Companies are also required to provide regular progress updates in regards to meeting the target amount.
Intended Use of Proceeds
Companies must declare the purpose of their Reg CF campaign, and how they intend to use any proceeds raised through their offering, with respect to the target offering amount.
In the event that a range of multiple potential uses has been identified by the issuer, the issuer must address each probable use and outline any factors contributing to the potential allocation of proceeds.
Current Financial Condition
Recent financial documents such as monthly revenue reports, expenses, and cost of goods sold (COGS) are required to determine the current financial condition of a company.
It is expected for an anticipated business plan to be included in the Form C filing, as well as a description of the issuer’s business.
Previous Financial Statements
Financial statements in GAAP format have to be included with the Form C filing to provide a picture of where the company stands financially. Depending on the date of incorporation, companies may require more or less detailed reports.
If a company intends to raise over $535K or this is their second Reg CF campaign, the provided statements must be audited by a CPA. See the tables below for more information.
Overview of CAP Table
SEC regulations require that companies disclose information about the ownership and capital structure of any companies engaging in Regulation Crowdfunding.
A CAP Table will provide this information, and the overview should contain information about the terms of securities being offered, any other securities, how securities are being valued, whether or not voting rights are associated with any securities, as well as the name and ownership level of each person, etc.
Potential Risks and Disclaimers
It is required by the SEC to disclose to investors that engaging in equity crowdfunding can be risky and that they should only be willing to invest what they are prepared to lose, as businesses can face any number of risks that could cause a company to potentially fail and not generate returns.
Platforms like WeFunder require that companies list at least 6 specific risks that their company and by extension, its investors, may face should they choose to invest.
Previous Debt and Equity Raises
Any prior debt the company has incurred must be disclosed to investors to allow for an informed decision of the company’s financial status.
Any previous equity raises conducted must be disclosed in your Form C, including information about the date, amount raised, terms of the raise, and valuation.
Records of Advertising Communications
Per SEC regulations, any communications made regarding your raise prior to filing must be attached to your Form C. There are strict rules about what may and may not be communicated prior to the approval of your filing, which you can learn more about here.
It is required to that no advertising may detail terms or include misleading information.
Additional Requirements from Platforms
Lead Investor’s Contact Information
Platforms like WeFunder require that companies choose a Lead Investor to simplify voting conditions for investors to weigh in on company decisions and direction by limiting it to one voice. Only your Lead Investor will be allowed to vote on behalf of the platform’s investors.
In order to allow the Lead Investor to be involved, the platform may require that the contact information for a Lead Investor be provided to them.
Work Profiles for Executives and Directors
In order to publicly disclose the relevant work history for a company’s executives, directors, and officers, some platforms will request the LinkedIn URL or a URL to a similar site where a resume or CV might be hosted.
If this URL is not provided, a company may have to provide this information to the crowdfunding platform separately, as it is legally required for the issuer to provide the work history of the company leadership to potential investors.
Financial Statements Required by Incorporation Date
All companies engaging in Regulation Crowdfunding are required to submit financial documents in GAAP format as part of their Form C filing. For companies that were incorporated more than 120 days ago, required financial documents include: a Cover page, Balance Sheet, Income Statement, Statement of Cash Flows, Statement of Stockholder’s Equity, and Footnotes. For companies that were incorporated less than 120 days ago, required financial documents include: a Cover Sheet, Balance Sheet, and Footnotes.
Requirements for companies incorporated more than 6 months ago
| Maximum Raise Size | 2 years* of financial reports in GAAP format | CPA Review Statement | Individual Auditor’s Report |
|---|---|---|---|
| Less than $250k | ✓ | ✗ | ✗ |
| More than $250K | ✓ | ✓ | ✗ |
| More than $1.07M | ✓ | ✗ | ✓ |
*Financial reports must cover a span of time from the date of incorporation up to the current date.
Requirements for companies incorporated more than 120 days ago
| Maximum Raise Size | Up to 2 years* of financial reports in GAAP format | CPA Review Statement | Individual Auditor’s Report |
|---|---|---|---|
| Less than $107k | ✓ | ✗ | ✗ |
| More than $107K | ✓ | ✓ | ✗ |
| More than $1.07M | ✓ | ✗ | ✓ |
*Financial reports must cover a span of time from the date of incorporation up to the current date.
Requirements for companies incorporated less than 120 days ago*
| Maximum Raise Size | Cover sheet, balance sheet and footnotes** | CPA Review Statement | Individual Auditor’s Report |
|---|---|---|---|
| Less than $107k | ✓ | ✗ | ✗ |
| More than $107K | ✓ | ✓ | ✗ |
| More than $1.07M | ✓ | ✗ | ✓ |
*If you just recently incorporated but do have 2 prior years of operating history (e.g. your company operated as an LLC for a while and then recently converted to a C-Corp), then you will need 2 years of financials (2019, 2020) in GAAP format. If you’re raising >$107K, these will need to include a CPA Review Statement.
**Financial reports must cover a span of time from the date of incorporation up to the current date.