Title III Crowdfunding Limits & Final Rules: Complete 2025 Guide to Regulation Crowdfunding

Introduction

Title III of the JOBS Act, implemented as Regulation Crowdfunding (Reg CF), has undergone significant evolution since its initial implementation in 2016. The SEC has amended the rules multiple times to increase offering limits, expand investment limits, and reduce compliance burdens, making Reg CF increasingly attractive for early-stage companies and small businesses. Understanding the current limits, requirements, and best practices is essential for issuers considering Reg CF and investors evaluating opportunities on crowdfunding platforms.

This comprehensive guide explains the current Title III offering limits, investment limits for different investor categories, financial statement requirements, ongoing reporting obligations, and strategic considerations for maximizing the effectiveness of Reg CF offerings. Whether you're planning your first Reg CF campaign or evaluating whether recent rule changes make Reg CF more attractive for your capital raise, this guide provides the detailed knowledge you need.

Current Offering Limits

The SEC has increased Reg CF offering limits three times since the regulation's initial implementation. The original 2016 rules set the limit at $1 million annually. The 2017 inflation adjustment increased it to $1.07 million. The 2021 amendments dramatically increased the limit to $5 million annually, making Reg CF viable for a much broader range of companies and capital needs.

The $5 million limit applies to the aggregate amount sold in reliance on Reg CF during any 12-month period. Issuers must calculate the aggregate amount by adding all amounts sold in Reg CF offerings during the 12 months preceding the current offering. If an issuer raised $2 million in a Reg CF offering that closed 8 months ago, they can raise up to $3 million in a new Reg CF offering without exceeding the annual limit.

The $5 million limit is specific to Reg CF and does not include amounts raised under other exemptions such as Regulation D or Regulation A+. However, issuers must consider integration rules that may combine offerings close in time under certain circumstances. Consult with securities counsel to ensure proper structuring of multiple offerings.

Investment Limits for Different Investor Categories

Reg CF imposes investment limits on non-accredited investors to protect retail investors from over-concentration in high-risk investments. Accredited investors, as defined in Rule 501 of Regulation D, face no investment limits and can invest unlimited amounts in Reg CF offerings.

Investment Limits for Non-Accredited Investors

The investment limit calculation depends on the investor's annual income and net worth. If either the investor's annual income or net worth is less than $124,000, the investor can invest the greater of $2,500 or 5% of the lesser of their annual income or net worth during any 12-month period. If both the investor's annual income and net worth are equal to or greater than $124,000, the investor can invest 10% of the lesser of their annual income or net worth (up to a maximum of $124,000) during any 12-month period.

Example 1: An investor with $50,000 annual income and $30,000 net worth can invest the greater of $2,500 or 5% of $30,000 (the lesser of income and net worth), which equals $2,500 (since 5% of $30,000 is $1,500, which is less than $2,500).

Example 2: An investor with $150,000 annual income and $200,000 net worth can invest 10% of $150,000 (the lesser of income and net worth), which equals $15,000.

Example 3: An investor with $2 million annual income and $5 million net worth can invest 10% of $2 million, which equals $200,000, but the maximum investment limit is $124,000, so they can invest $124,000.

The investment limits apply across all Reg CF offerings during any 12-month period, not per offering. An investor who has already invested $10,000 in one Reg CF offering can only invest an additional $5,000 in another Reg CF offering if their total limit is $15,000.

Calculating Net Worth

For purposes of calculating investment limits, net worth is calculated by subtracting liabilities from assets. The value of the investor's primary residence must be excluded from assets, and any mortgage or other debt secured by the primary residence (up to the estimated fair market value of the residence) must be excluded from liabilities. Any amount of such debt that exceeds the estimated fair market value of the residence must be included as a liability.

Financial Statement Requirements

Reg CF financial statement requirements vary based on the offering amount and whether the issuer has previously conducted Reg CF offerings. The requirements balance investor protection with the need to keep compliance costs reasonable for small issuers.

For Offerings Up to $124,000

Issuers raising up to $124,000 must provide financial statements certified by the principal executive officer as true and complete in all material respects. No review or audit by an independent accountant is required, significantly reducing costs for very small offerings.

For Offerings Between $124,000 and $618,000

Issuers raising between $124,000 and $618,000 must provide financial statements reviewed by an independent public accountant. However, if the issuer is conducting its first Reg CF offering, it may provide financial statements certified by the principal executive officer instead of reviewed financials.

For Offerings Over $618,000

Issuers raising over $618,000 must provide financial statements reviewed by an independent public accountant. If the issuer has previously conducted a Reg CF offering and has raised more than $618,000 in total across all Reg CF offerings, the financial statements must be audited by an independent public accountant.

The cost of reviewed financial statements typically ranges from $5,000 to $15,000, while audited financial statements typically cost $15,000 to $40,000 depending on the complexity of the business and the quality of existing financial records.

Ongoing Reporting Requirements

Issuers that have conducted Reg CF offerings must file annual reports on Form C-AR with the SEC and provide them to investors. The annual report must be filed no later than 120 days after the end of the fiscal year and must include financial statements, management's discussion and analysis, and disclosure of material changes to the business.

The financial statements in annual reports do not need to be reviewed or audited unless the issuer has raised more than $618,000 in total across all Reg CF offerings, in which case the financial statements must be reviewed. If the issuer has raised more than $10.7 million in total across all Reg CF offerings, the financial statements must be audited.

Issuers can terminate their annual reporting obligations by filing a Form C-TR if the issuer has filed at least one annual report and has fewer than 300 holders of record, the issuer has filed annual reports for at least three years and has fewer than 1,200 holders of record and total assets of $10 million or less, or the issuer or another party repurchases all securities issued in the Reg CF offering.

Special Purpose Vehicles (SPVs)

The 2021 amendments permit issuers to use special purpose vehicles (SPVs) to pool investors in Reg CF offerings. An SPV is a legal entity created solely to invest in a single company. The use of SPVs can simplify cap table management by consolidating hundreds or thousands of individual investors into a single entity on the issuer's cap table.

The SPV structure is particularly valuable for issuers concerned about reaching the 2,000 shareholder threshold that triggers Exchange Act registration requirements. By pooling investors into SPVs, issuers can raise capital from thousands of investors while maintaining a manageable number of direct shareholders.

Funding Portal Requirements

Reg CF offerings must be conducted through an SEC-registered funding portal or an SEC-registered broker-dealer. The funding portal facilitates the offering by providing a platform for investor education, investment processing, and communications between issuers and investors. Funding portals are prohibited from offering investment advice or recommendations, soliciting purchases of securities, or compensating employees based on the sale of securities.

Funding portals typically charge issuers fees ranging from 5% to 7% of capital raised, plus payment processing fees of 2-3%. Some portals also charge listing fees, success fees, or ongoing investor relations fees. Issuers should carefully evaluate portal fees, investor reach, success rates, and support services when selecting a funding portal.

Advertising and Investor Communications

Issuers may advertise the terms of Reg CF offerings through communications that direct investors to the funding portal, provided the communications include specified legends and do not include false or misleading statements. Issuers may use social media, email marketing, traditional advertising, and public relations to promote their offerings, making Reg CF significantly more flexible than Rule 506(b) offerings that prohibit general solicitation.

However, all substantive communications with investors about the offering must occur through the funding portal's platform to ensure proper disclosure and investor education. Issuers cannot accept investment commitments or payments outside the funding portal.

Frequently Asked Questions

What is the current Reg CF offering limit?

The current limit is $5 million in any 12-month period, increased from $1.07 million by the 2021 amendments.

Can non-accredited investors invest in Reg CF offerings?

Yes, non-accredited investors can invest subject to limits based on their income and net worth. Accredited investors face no limits.

How do I calculate my investment limit as a non-accredited investor?

If your income or net worth is under $124,000, you can invest the greater of $2,500 or 5% of the lesser of your income or net worth. If both are over $124,000, you can invest 10% of the lesser (up to $124,000 maximum).

Do I need audited financial statements for a Reg CF offering?

It depends on the offering amount and your history. Offerings under $618,000 require only reviewed financials (or certified financials for first-time issuers). Offerings over $618,000 require reviewed financials, or audited if you've previously raised over $618,000 total.

How long do ongoing reporting obligations last?

You must file annual reports until you meet termination conditions, such as having fewer than 300 shareholders and filing at least one annual report.

Can I use an SPV to manage my cap table?

Yes, the 2021 amendments permit SPVs to pool investors, simplifying cap table management.

What are funding portal fees?

Typical fees are 5-7% of capital raised plus 2-3% payment processing fees.

Can I advertise my Reg CF offering on social media?

Yes, you can advertise the terms and direct investors to the funding portal, but all substantive communications must occur through the portal's platform.

Ready to launch a Reg CF offering? CrowdEngine partners with leading funding portals to support Reg CF campaigns. Request a demo to learn more.

Related Resources:

• Equity Crowdfunding: Reg A+ vs Reg CF vs Reg D [blocked]
• JOBS Act Overview [blocked]
• Regulation D: Word for Word [blocked]