The Ultimate Guide to Regulation Crowdfunding (Reg CF): Your Path to Raising Community Capital

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Regulation Crowdfunding, or Reg CF, is a securities exemption created under the JOBS Act that lets eligible private companies raise up to $5 million within a 12-month period from the general public, including everyday, non-accredited investors, through an SEC-registered funding portal or broker-dealer. For founders who want to raise capital from their own customers and community, not just venture capital or angel investors, Reg CF opens the door to a much broader base of backers. This guide walks through how Reg CF works, who can use it, how much companies and investors can raise or invest, and what compliance actually requires.

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What is Regulation Crowdfunding (Reg CF)?

Definition and History

Reg CF was created under Title III of the 2012 JOBS Act and took effect in May 2016 through SEC rulemaking. Before Reg CF existed, private securities offerings were largely limited to accredited investors under Regulation D, typically the wealthiest households and institutions. Reg CF changed that by creating a framework where everyday individuals, not just accredited investors, can invest in early-stage and growing companies in exchange for equity, debt, SAFEs, or other securities, through a single SEC-registered online platform.

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The Advantages of Reg CF to Raise Capital

Reg CF gives both companies and investors access to opportunities that were previously out of reach for most people.

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For Companies

• Access to a large pool of potential investors, including customers and community members, not just institutional investors
• A way to validate market demand while raising capital
• Investors who become brand advocates and repeat customers
• No requirement that investors be accredited, which widens the pool significantly

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For Investors

• Ability to invest in private companies previously reserved for accredited investors
• Ability to support companies and causes they care about
• Access to earlier-stage investment opportunities across many industries

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Who Can Use Reg CF? Eligibility Requirements

Not every company can use Reg CF. To be eligible, a company must:

• Be organized under, and subject to, the laws of a U.S. state or territory (non-U.S. companies aren't eligible)
• Not already be an Exchange Act reporting company
• Not be an investment company as defined under the Investment Company Act, or excluded from that definition under specific sections of it
• Not be disqualified under Reg CF's “bad actor” provisions (more on this below)
• Have filed any Reg CF annual reports required for the two years before this offering
• Have a specific business plan; that plan can't be to engage in a merger or acquisition with an unidentified company

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There's no dollar-based asset ceiling on which companies can use Reg CF. A common point of confusion is the $25 million total-asset figure, that number applies to a different rule entirely, the Section 12(g) exemption from public-company registration, covered later in this guide. It has nothing to do with whether a company can run a Reg CF raise in the first place.

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How Much You Can Raise, and How Much Investors Can Invest

Companies can raise up to $5 million in any rolling 12-month period through Reg CF. That ceiling was raised from the original $1.07 million by an SEC rule change in late 2020. Investor contribution limits depend on income and net worth. If your annual income or net worth is under $124,000, your limit is the greater of $2,500 or 5% of whichever figure is higher. If both are $124,000 or more, your limit is 10% of the greater figure, up to a maximum of $124,000 across all Reg CF investments in a 12-month period.

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How Reg CF Works: The Offering Process

A Reg CF raise generally follows six steps:

• Prepare your offering: business plan, use of proceeds, risk factors, and financial statements at the level required for your raise size
• Choose an SEC-registered funding portal or broker-dealer to host your offering
• File Form C with the SEC, disclosing your company's financial condition, the offering's terms, and its risk factors
• Market your campaign within Reg CF's advertising rules (below)
• Close your offering once you hit your funding target or reach your deadline
• File ongoing annual reports once the offering closes (below)

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Financial Statement Requirements by Raise Size

How much detail those financial statements need depends on how much you're raising in the 12 months before the offering:

• $124,000 or less: financial statements certified by your principal executive officer (or reviewed/audited statements, if you already have them)
• More than $124,000 up to $618,000: financial statements reviewed by an independent public accountant
• More than $618,000 up to $1,235,000, for first-time Reg CF issuers: reviewed financial statements, unless audited ones are already available
• More than $1,235,000 for first-time issuers, or any amount above $618,000 for issuers who've raised under Reg CF before: audited financial statements

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Marketing and Advertising Restrictions

Once your Form C is filed, you can't advertise the terms of your raise everywhere. Off-platform, you're limited to a brief notice: that you're raising under Reg CF, the platform you're using, and a link to it. Any real discussion of your offering, the amount, the price, and your progress toward your goal has to happen on your funding portal's own communication channels, where you must identify yourself as the issuer. If you pay anyone to promote your raise, they have to clearly disclose that they're being compensated every time they do.

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Testing the Waters Before You File

Before you file your Form C, you're allowed to “test the waters,” gauging investor interest publicly without collecting money or commitments. Any materials you use have to make clear that you're not accepting money yet, that no offer can be accepted until you've filed and met your exemption's requirements, and that expressing interest doesn't commit anyone to anything. Once you file your Form C, this period ends, and any materials you used testing the waters have to be included in that filing.

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Resale Restrictions

Generally, no, not right away. Securities bought through a Reg CF offering can't be resold for one year. There are a few exceptions: you can transfer them back to the issuing company, to an accredited investor, as part of an SEC-registered offering, or to a family member (including through a trust), or in connection with a death or divorce.

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Registering as a Public Company (Section 12(g))

Not automatically. Normally, once a company's securities are held by 2,000 or more people (or 500 or more non-accredited investors) and it has more than $10 million in total assets, the SEC requires it to register that class of securities and start reporting like a public company. Reg CF exempts you from that count, as long as you stay current on your Reg CF annual reports, keep total assets at $25 million or less at the end of your fiscal year, and use an SEC-registered transfer agent. If you grow past $25 million in assets and cross those holder thresholds, you get a two-year transition period before registration kicks in, as long as you're current on your annual reports. This is the only place in Reg CF where a $25 million asset figure applies, it has no bearing on whether you're eligible to run a Reg CF raise in the first place.

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Bad Actor Disqualification

Reg CF also disqualifies offerings where certain people involved, called “covered persons,” have a disqualifying history. Covered persons include the company itself (and its predecessors and affiliates), its directors, officers, and general partners, anyone who owns 20% or more of its voting stock, promoters connected to the offering, and anyone paid to solicit investors on the company's behalf.

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A disqualifying event includes things like a securities fraud conviction, certain court injunctions, final orders from state or federal regulators, SEC disciplinary or cease-and-desist orders, being suspended or barred from a self-regulatory organization like FINRA, or SEC stop orders. Most carry a five- to ten-year look-back period. If a covered person has one of these in their history and the company didn't know and couldn't reasonably have known about it, there's a narrow exception, and the SEC can also grant a waiver for good cause.

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Ongoing Reporting Requirements

Once your offering closes, you have to file an annual report (Form C-AR) with the SEC within 120 days of your fiscal year-end, and post it on your website. That obligation continues until certain conditions are met, for example, becoming a fully reporting company, buying back all outstanding securities, or ceasing business operations, among others.

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Best Practices for a Successful Reg CF Campaign

• Build your investor list and warm up your community before you launch
• Set a realistic funding target based on your actual capital needs
• Prepare your financial statements and Form C well ahead of your launch date
• Keep investors updated throughout the raise; momentum drives more momentum
• Plan your post-raise investor communications and annual reporting from day one

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How DealMaker Can Help

DealMaker's platform supports the entire Reg CF process, from Form C preparation and compliance workflows to investor onboarding, payment processing, and post-raise cap table management, all in one place, so founders can focus on running their raise instead of managing paperwork across multiple vendors.

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Conclusion

Reg CF gives companies a legitimate, well-regulated way to raise capital from their own community, not just institutional investors. Understanding the eligibility rules, investor limits, and disclosure requirements up front makes it much easier to run a compliant, successful raise.

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As always, this is directional only, and you should speak to your advisor to make the best decision for your capital raise.

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