There is a lot of inaccurate information out in the media regarding the cost of raising money online via 506(c) or 4(a)(6) crowdfunding. This is almost entirely from one of FundAmerica’s competitors – he and I have gone numerous rounds both privately and in industry forums about this. He’s adamant that it will motivate the SEC to issue lighter regulations, whereas I’m adamant that it won’t and that the misinformation is doing nothing more than needlessly freaking people out about online fundraising.
Here’s what you should do…Forget everything you’ve read, as it’s all wrong.
So, what are the hard costs of raising funds online using the 506(c) exemption? (and, soon, the 4(a)(6) exemption)
These can be broken down into two types – hard costs and variable/success fees.
Hard Costs:(charged to the issuer no matter what, regardless of whether the offering is/isn’t successful)
Legal – $varies for your attorney to review and edit the offering subscription agreement and risk disclosures
Accounting – $0 (no audits or reviews are required in 506-D offerings)
Offering Documentation – $0 (use the online template, and no printing costs)
Compliance – $2 per investors, $30 for the issuer/entity, $30 per each officer, director and 20%+ beneficial owner for AML, Patriot Act, corporate status, bankruptcy, and other checks
Escrow – $250 plus AML and incoming funds costs
Form D – No charges for filing with the SEC, but there are one-time state fees for each location of your investors (approx $350 per state). Plus if you don’t file the form yourself (via Edgar) and instead have someone else do it then there will be some labor costs, but shouldn’t be too much
Call or email me with any questions and lets put an end to the misinformation.