What financial information do I need to provide with my Form C to do a Title III Crowdfunding? Do I need an audit?
A lot of people have been asking about the financial statement requirements for Title III Regulation CF Crowdfunding offerings. We would like to break it down for you.
All companies must provide financial statements (balance sheet, income statement and cash flows and stockholders’ equity) for the past two fiscal years or shorter if the company hasn’t been in business that long. These financial statements must be prepared in accordance with GAAP which stands for Generally Accepted Accounting Principles and means a common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information. The Company’s financial statements are required to be in GAAP format prior to filing the Form C with the SEC. An accountant (see the bottom of the post for some suggestions) can help you prepare your financial statements in accordance with GAAP.
In addition, depending on the amount of money you are raising, there are other requirements as well.
If your maximum amount is:
(1) $100,000 or less, then in addition to your financial statements you need to state the amount of total income, taxable income and total tax, or the equivalent line items, as the company reported on its federal income tax returns for the most recently completed fiscal year, also the CEO of the company will need to certify that the information reported on the company’s tax returns and in the provided financial statements are true and complete in all material respects.
(2) More than $100,000, but not more than $500,000 or if over $500,000 and it is the company’s first time using Regulation CF, then you need to have the company’s financial statements reviewed by a public accountant. Now “reviewed” is a technical term that entails more than just looking over, and requires certain procedures on the part of the accountant, it is not however as intense or as expensive as a full blown audit.
(3) More than $500,000 and the company has raised money using Regulation CF before, then the company has to provide financial statements that have been audited by a public accountant. This of course entails more expense and time to prepare.
Remember, the required financial statements must be prepared prior to filing and attached as an exhibit to the Form C BEFORE you can conduct your offering.