What it is
Equity crowdfunding is a method where a company raises money by offering securities, such as ownership shares, to a broad group of people online. It is different from donation or rewards crowdfunding, where supporters give gifts or receive a product and do not receive an ownership interest.
In the United States, one common framework is Regulation Crowdfunding, often called Reg CF. It is a securities exemption that allows certain companies to raise money from the public under specific conditions. It differs from other exemptions in who may participate, what disclosures are required, and how offers may be advertised. Rules and limits change, so always check current requirements with the SEC and a securities attorney.
Equity raises must go through an SEC-registered funding portal or broker-dealer. Investing in these offerings is risky and illiquid, meaning people may lose money and may not be able to sell their stake easily. Nothing on this page is an offer, solicitation or recommendation of any security.
How it’s traditionally been approached
Historically, small businesses sought capital from banks, personal savings, family and friends, or a small circle of private investors. Selling ownership to the general public was generally limited to larger companies that went through a full registration process.
Over time, securities laws created several exemptions that let companies raise money with fewer steps than a full public offering. Reg CF is one of these, and others have their own rules about investor eligibility, disclosures and general advertising. Each path involves different tradeoffs in cost, time, and legal obligations.
Many founders also consider non-equity routes such as donations, rewards-based campaigns, loans, or grants, depending on their goals. No single approach is right for everyone, and each has its own responsibilities and risks.
How the right fundraising pro may help
The right fundraising pro, such as a Reg CF guidance specialist, may help you understand which type of fundraising fits your situation and what the general process looks like. They may also explain how an offering is typically prepared, what disclosures are involved, and how communication with supporters is usually handled.
A first conversation is often an educational discussion about your goals, your business stage and your comfort with legal and reporting obligations. Helpful questions to ask include: What exemptions might apply to my situation? What ongoing obligations come after a raise? How do you work alongside a securities attorney? What should I understand about portal or broker-dealer requirements?
A tax and accounting professional may also help you understand record-keeping and how different funds may be treated. Whether money raised is taxable or deductible depends on the facts, so ask a qualified tax professional. A pro can offer perspective, but cannot promise any campaign will succeed.
The bigger picture
Raising money can be exciting, and it can also be stressful. Putting your business, your reputation and other people's trust on the line may affect your sleep, your family life and your peace of mind. Taking time to learn the basics, set realistic expectations and ask questions may help you make calmer, better-informed decisions.
Think about the whole picture: your finances, your relationships with supporters and your own wellbeing. Many founders find it helpful to build a support team and pace themselves. If you are a health or wellness professional looking for business resources, Providers.plus may be one place to explore.
Keep in mind
- This page is educational only and is not legal, tax, accounting or investment advice.
- Equity raises must go through an SEC-registered funding portal or broker-dealer, and investing is risky and illiquid.
- Rules and limits change, so check with the SEC and a securities attorney before acting.
- Be truthful and specific in any fundraising message and use money as described, since misusing funds can be fraud.
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Start a fundraiser →Frequently asked questions
What is equity crowdfunding?
Equity crowdfunding is a way for a company to offer ownership stakes to many people online under securities rules. It is different from donation or rewards crowdfunding because supporters may receive a security rather than a gift or product. Investing in this way is risky and illiquid.
What is Regulation Crowdfunding (Reg CF)?
Regulation Crowdfunding, or Reg CF, is a securities exemption that lets eligible companies raise money from the public under specific conditions. It requires certain disclosures and the use of an SEC-registered funding portal or broker-dealer. Rules change, so check with the SEC and a securities attorney.
Is equity crowdfunding the same as donation crowdfunding?
No, they are different. Donation crowdfunding collects gifts without offering ownership, while equity crowdfunding involves offering securities. Because securities laws apply to equity raises, the legal responsibilities are generally much greater.
Do I need a securities attorney for equity crowdfunding?
Many founders choose to work with a securities attorney because equity raises are regulated. An attorney may help you understand which exemption applies and what your obligations are. This page is general education and not legal advice.
Is money raised through equity crowdfunding taxable?
It depends on the facts of your situation, so ask a qualified tax professional. Treatment can vary based on how your business is structured and what is being offered. Do not assume any particular outcome without professional guidance.
Can a fundraising pro guarantee my equity crowdfunding campaign will succeed?
No, no one can guarantee success. The right pro may help you understand the process, prepare materials and ask good questions. Results depend on many factors outside anyone's control.
Educational resource. 2A Crowd shares general information and connects people with independent fundraising pros. It is not professional advice. Talk with a qualified professional about your own situation.