{"id":379,"date":"2014-04-08T16:49:34","date_gmt":"2014-04-08T21:49:34","guid":{"rendered":"http:\/\/www.accreditedinvestorleads.com\/?p=379"},"modified":"2020-01-21T17:56:03","modified_gmt":"2020-01-21T21:56:03","slug":"flexibility-benefits-of-reg-d","status":"publish","type":"post","link":"https:\/\/www.accreditedinvestorleads.com\/flexibility-benefits-of-reg-d\/","title":{"rendered":"The Flexibility Benefits of Reg D Rule 505"},"content":{"rendered":"

When issuing \u00a0a private placement it is important to select the rule under Regulation D that will provide you with the flexibility you need to raise money and operate business as usual. Regulation D has Rule 504, Rule 505, and Rule 506. \u00a0Each of them have different requirements and regulations regarding who can invest, how much money you can raise, and the disclosures you need to give. \u00a0Rule 506 is the most widely used exemption but there are some flexibility benefits of using Rule 505 instead.<\/p>\n

Expand your investor pool using Rule 505.<\/strong><\/p>\n

In Rule 505 you can have up to 35 non-accredited investors participate. \u00a0On the surface this appears to be the same when using Rule 506 but that is not the case. \u00a0Rule 506(b) requires that all non accredited investors are sophisticated and Rule 506(c) does not allow for non accredited investors at all. \u00a0It is recommended that you focus on accredited investors, regardless of the rule that you use. \u00a0You can even purchase leads<\/a> from www.accreditedinvestorleads.com<\/a>. \u00a0However, you never know when an accredited investor may have a cousin or coworker that also wants to invest but doesn’t meet the requirements. \u00a0If you have issued a private placement using Rule 505, you can work with them as well.<\/p>\n

Disclosures and Information<\/strong><\/p>\n

When using Rule 505 you get to decide what information to give investors. \u00a0The more you disclose, the safer you are in the event of an investor complaint. \u00a0However, the disclosures are based on what you want to share and not specific requirements. \u00a0Rule 506 has additional disclosure requirements. This can be beneficial for companies that do not have a lot of capital and are putting together their private placement in house. \u00a0It is not always affordable to hire a CPA to certify or audit your financials. \u00a0When using Rule 505, they don’t have to.<\/p>\n

One drawback to Rule 505 is that you are limited in how much money you can raise. \u00a0It caps companies at $5 million during a 12 month period. \u00a0It is geared towards smaller offerings and that’s why the disclosure requirements are virtually non-existent. \u00a0Simultaneously companies that are doing a larger raise typically have the funds to hire people to assist with producing the additional disclosures and materials.<\/p>\n

Prior to issuing your private placement consider the following:<\/p>\n