We are now in 2019, the fourth full year equity crowdfunding has been in existence. Looking back, many, including myself expected 2018 to be a breakout year…unfortunately that wasn’t exactly the case. So, we continue to ask, what does the next year and next five years have in store for the equity crowdfunding industry, and more specifically Reg A+?
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In these early days of Regulation A + (Reg A+, raises up to $50 Million) and Title III Regulation Crowdfunding (Reg CF, raises up to $1 Million), one of the hardest things to do as a potential issuer utilizing equity crowdfunding is to vet the service providers you want to work with.
Choosing the people your company works with, the people that give you advice, the people you trust is one of the most important things to do as a business. Bad advice can set you back years, while good advice can accelerate you forward.
Often we get the questions:
How do we (the issuer) choose a CPA firm for equity crowdfunding?
Why should I choose you over another firm?
Both great questions! Let’s cover both types of equity crowdfunding as they will dictate different responses.
Regulation Crowdfunding (Raises up to $1M) have less regulation. The financial statement reviews required can be performed by almost any CPA firm so long as they are registered to sign attestation reports in the state where you as the business owner are located. Many firms only provide tax services and are specifically precluded from doing this work. However, for Reg CF, firms don’t have to be PCAOB registered, but they still must be registered with state(s). One of the common issues that has come up, is CPA firms are issuing reports for issuers that are not in their home state. If the CPA firm is not registered in the issuers’ home state or have practice privilege there, (every state is different) then the opinion can be deemed invalid and your campaign could flop before it starts.
For Reg A+, you should use a PCAOB registered firm (although not required in certain circumstances) in the chance you want to, or someday may want to be listed on a public stock exchange. All the same rules apply as Reg CF, make sure you use a CPA firm that can work in your home state.
So what sets CPA firms apart? You can see from the initial 100 filings for Reg CF companies and from review of many of the Reg A+ filings, some financial statements are better than others. Whereas financial statements are ultimately the responsibility of issuer management, CPA firms should be making sure they go out nice, neat and clean with all required information (a requirement of the opinion they issue). It is apparent (very obviously to people who know) that some firms are swimming in waters that are too deep for them. They just don’t know the requirements and maybe shouldn’t be doing the work in the first place. That is a significant issuer for an issuer as the issuer is ultimately responsible for everything.
However, the real difference maker is if the CPA firm makes Reg A+ and Reg CF an emphasis in their practice. CPA’s should be well connected to marketing firms, portals, SEC attorneys’, all of whom are in the equity crowdfunding space. If they aren’t connected, THAT is the difference.
As equity crowdfunding through Regulation A+ and Title III Regulation crowdfunding start to become more popular, it has been our pleasure to be one of the nations leading CPA firms when it comes to equity crowdfunding.
We are proud to announce our sponsorship of the Crowd Invest Summit on December 7-8, 2016, a conference and expo meant to educate and bring together investors of all types with startups, issuers, and real estate investment opportunities.
David Gosselin of dbbmckennon will be a featured panelist to discuss the accounting and audit requirements of equity crowdfunding under Reg A+ and Reg CF. David has become the top CPAs in the nation for equity crowdfunding. We look forward to seeing everyone at the event.
The long await for May 16, 2016 is finally over and Title III Regulation Crowdfunding ("Reg CF") is now legal!
Everyone involved with equity crowdfunding and specifically Title III, Regulation Crowdfunding (“Reg CF”) has May 16, 2016 marked in their calendars. Now we are just a few weeks away from that magical date and there are still many unknowns. One of the biggest unknowns is if the funding portals will be approved by FINRA to start Reg CF. While that variable might not be known until very close to May 16, there are steps that issuers can take to prepare for Reg CF filings. Start by organizing your information for the Form C filing (see page 603 of 685 of the link). One of the lengthiest steps to preparing for a Reg CF raise is getting your financial statements reviewed by a CPA, which is where we (dbbmckennon) come in.
One of the biggest misconceptions about the financial statement review process is how long it takes and what is involved. The financial statements being presented in the Form C are virtually no different than what any US public company files with the SEC. The financials and notes, which can be lengthy, are held to similar disclosure standards. For very early stage companies, reviews can be done in about a week. For business that have been around for one, two, or many years, the review process can take 2-3 weeks or longer depending on how organized the Company is.
So what does that mean. If you plan to do a Reg CF capital raise at the very start of when it becomes available (May 16), you should contact us today to get your Reg CF financial statement review started. With only a few weeks left, time is running out to make sure everything is complete for filing.
dbbmckennon is a full service CPA firm with offices in Orange County, San Diego and Santa Monica, focused on providing quality accounting and consulting services at reasonable rates. We specialize in companies filing with the SEC and utilizing equity crowdfunding through Reg A+ and Regulation Crowdfunding. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.
In March 2016, dbbmckennon's David Gosselin, one of the nations leading CPA's for equity crowdfunding, spoke about regulation A (Reg A+ or mini-IPO's), Regulation Crowdfunding, the audit requirement for these new regulations, and other topics at the SV Crowdfund Conference. dbbmckennon was pleased to speak and sponsor the event as we pave the way for this new era of finance.