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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
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Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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If you are an affiliate, you must file a notice with the SEC

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If you are an affiliate, you must file a notice with the SEC on Form 144 if the sale involves more than 5,000 shares or the aggregate dollar amount is greater than $50,000 in any three-month period. The sale must take place within three months of filing the notice and, if the securities have not been sold, you must file an amended notice. Does this apply to start-up that has a few shareholders, and attempt to raise seed money to start the business?
Thank you for your additional question. To add to what you were already told about accredited investors. Shares do not have to be registered for sale if the sale is an intrastate sale of shares.

An intrastate offering is an offering made only to the residents of a state by a corporation in that state. The offering must be registered in the state, and it must comply with SEC Rule 147:

  • the issuer is incorporated in the state;
  • at least 80% of the issuer’s revenues must come from business within the state,
  • at least 80% of the issuer’s assets must be located in the state,
  • at least 80% of the proceeds of the offering must be used in the state;
  • buyers of the offering must be state residents or an entity owned by state residents.

Resale is permitted only:

  • to other state residents;
  • or to other buyers only after 9 months after the termination of the Rule 147 offering;
  • and the certificates and offering document must specify these resale restrictions.

If your sale is complying with these terms you can get away with a 147 offering as well to raise small capital in your local company.



A corporation can raise up to $5,000,000 within a 12-month period from any number of accredited investors, but no more than 35 non-accredited investors.

A non-accredited investor is anyone or organization who is not an accredited investor. However, a married couple counts as 1 non-accredited investor, as well as any purchase of issues under the Uniform Gifts to Minors Act (UGMA) for their dependent children. A partnership that was not formed for a Reg D investment is considered to be 1 non-accredited investor; if the partnership was formed expressly for this investment, then the number of non-accredited investors depends on the status of each partner.


Furthermore, a non-reporting company can raise up to $1,000,000 from any number of individuals, accredited or not, without a SEC registration.


144 securities are restricted securities which are securities acquired in unregistered, private sales from the issuer or from an affiliate of the issuer. Investors typically receive restricted securities through private placement offerings, Regulation D offerings, employee stock benefit plans, as compensation for professional services, or in exchange for providing start-up capital to the company. Rule 144(a)(3) identifies what sales produce restricted securities. Restricted stock will usually have the restrictive legend, "restricted", on the certificates to serve as notice that their resale is restricted.


Control stock is stock owned by a control person (aka insider, affiliate), who is a corporate director or officer, or a stockholder with more than 10% of the voting stock, or the spouses of the aforementioned.


Rule 144 places limitations on any resale of restricted securities. Control stock is also restricted; however, control stock certificates usually do not have the restrictive legend. Although these restrictions can be removed by fully registering the security, the time and expense of a full registration is usually prohibitive. However, control persons can sell normally restricted stock without restrictions if sold as part of a registered primary offering by the issuer. No restricted stock can be sold unless the issuer is current in filing all required financial statements to the SEC.

Before restricted stock can be resold:

  1. The seller must have had the fully paid stock for 1 year.
  2. The issuer has complied with the periodic reporting requirements of the Securities Exchange Act of 1934.
  3. If the quantity of the stock exceeds 500 shares or $10,000 in value, then he must also file a Form 144, Notice of Proposed Sale, with the SEC with the details of the sale and compliance with Rule 144. The sale must take place within a 90-day period; otherwise another Form 144 must be filed that will cover another 90 days.
  4. The total value of an exchange-traded stock cannot exceed the greater of 1% of the issuer’s outstanding stock, or the average weekly volume for the preceding 4 weeks. If the stock is only traded over the counter, then the sale cannot exceed 1% of the issuer's outstanding stock.
  5. The stock must be sold as an ordinary brokerage transaction with the regular commission charged. Neither the seller nor the broker can solicit orders to buy the securities.

Exceptions to the 144 requirement include the resale by a member firm in an agency capacity, or if a market maker in the security purchases the issue as a principal for his own account.

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Customer: replied 4 years ago.

I just sent you more details.

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Please post your reply again because I did not receive it as you can see by looking at everything that has posed above.
Customer: replied 4 years ago.

If we need to raise $1000,000 from accredited and non-accredited investors who are friends and family (not general public), what rules do we have to comply with for the number of none accredited investors to exceed the 35?

If you seek to raise the $1,000,000 from non-accredited investors or $5,000,000 from both accredited and non-accredited (not to exceed 35). These investments are under Regulation A:

Regulation A of the Securities Act of 1933 (aka Reg A) exempts small offerings of securities from the regular SEC registration if these conditions are met:

  • The public offering is not for more than $5,000,000 within a 12-month period.
  • The offering statement, which is a simplified disclosure document, must be filed with a Regional Office of the SEC at least 10 days before the issue is offered for sale.
  • The offering circular, which is similar to the prospectus in providing full disclosure, must be sent to each buyer of the issue at least 48 hours before the confirmation of the sale.
  • The offering circular must be revised if the issue is still being offered 9 months after the initial issue, and the issuer must file a sales report of the issue with the Securities and Exchange Commission (SEC) every 6 months until the offer is terminated.
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