How can I legally accept investment from non-accredited investors in my network?

Yes. In the U.S., you can legally raise money from non-accredited investors, but the structure matters. This is securities-law territory, so you should have a securities attorney review the offering before taking money.

The main routes are:

1. Rule 506(b) — often the simplest for a personal network

Under Regulation D Rule 506(b), you can raise an unlimited amount and sell to accredited investors plus up to 35 non-accredited investors. The non-accredited investors must meet a sophistication standard, and you generally cannot publicly advertise or generally solicit the offering.

For those non-accredited investors, you have substantially greater disclosure obligations—including specified financial information and information generally comparable to what would be provided in a registered offering.

This can be attractive if by "my network" you mean people you already know personally or through an established relationship.

2. Regulation Crowdfunding — best if you want lots of ordinary investors

Regulation Crowdfunding (Reg CF) allows eligible companies to raise up to $5 million in a 12-month period, including from non-accredited investors. But the offering must go through an SEC-registered broker-dealer or funding portal, and there are disclosure and investment-limit requirements.

This is the more natural route if you want to tell a broad group of people, "Anyone can invest $500/$2,000/$10,000."

3. Regulation A — potentially useful for a larger public offering

Regulation A has two tiers: up to $20 million (Tier 1) and up to $75 million (Tier 2) in a 12-month period. Non-accredited investors can participate; Tier 2 generally limits a non-accredited investor's investment to 10% of the greater of their annual income or net worth, subject to exceptions.

It's considerably more involved than a typical friends-and-family financing.

What I would not do

Don't simply create an LLC, call the investment "membership interests," and start taking checks from friends. An LLC interest, stock, SAFE, convertible note, or similar investment can be a security, and an offering generally needs registration or a valid exemption.

Likewise, don't assume that calling people "friends and family" makes the offering exempt. The actual securities exemption and its requirements matter.

A practical structure

If you're raising, say, $250k–$2M for your startup from 10–30 people you already know, a lawyer would likely at least evaluate something like:

Company → Rule 506(b) offering → accredited + qualifying non-accredited investors → private offering documents → subscription agreements → Form D/state filings

The key issue is whether your particular investors qualify and whether you've avoided general solicitation. Rule 506(b) requires no more than 35 non-accredited purchasers, and securities sold are generally restricted.

If you want to post publicly on LinkedIn/social media and invite anyone to invest, that's a different analysis: 506(b) generally won't work because of its no-general-solicitation requirement. Reg CF or another registered/exempt pathway may be more appropriate.

One important distinction: "non-accredited" doesn't necessarily mean "unsophisticated." Rule 506(b) has specific requirements for non-accredited purchasers, so you shouldn't treat the 35-person allowance as 35 arbitrary retail investors.

If you tell me (1) how much you're raising, (2) what you're selling—startup equity, SAFE, convertible note, LLC interests, or a fund—and (3) roughly how many people you want to accept money from, I can map out the most likely legal pathways and the practical costs/complexity of each.

Legally accepting investments from non-accredited investors (friends, family, or everyday contacts in your network) requires navigating federal and state securities laws. Under U.S. law, every offer and sale of securities must either be registered with the SEC or qualify for an exemption. Registering is expensive and complex, so founders typically rely on specific SEC exemptions.

The primary pathways to legally include non-accredited investors depend on how you source them and how much paperwork you want to handle:

1. Rule 506(b) of Regulation D (Best for a Close Network)

Rule 506(b) is the most common exemption used by early-stage startups taking money from people they already know.

• The Non-Accredited Limit: You can accept an unlimited amount of total capital from an unlimited number of accredited investors, plus up to 35 non-accredited investors.
• The Catch on Relationships: You cannot use general solicitation, public advertising, social media posts, or pitch events to find these investors. There must be a preexisting, substantive relationship with them (e.g., close personal friends, family, or business associates).
• The Disclosure Burden: If you include even one non-accredited investor under Rule 506(b), you must provide all investors with extensive financial and disclosure documents (similar to what would be required in a registered offering), which can mean legal overhead. You must also reasonably believe that every non-accredited investor (either alone or with a financial/purchaser representative) has enough financial and business knowledge to evaluate the investment.
• State Law ("Blue Sky" Laws): While Rule 506(b) preempts state registration, you still have to file notice paperwork and pay fees in the states where your non-accredited investors live.

2. Regulation Crowdfunding (Reg CF) (Best for a Broad Network)

If the people in your network aren't close enough personal contacts to satisfy Rule 506(b)—or if you want to broadcast your round publicly—you can use Reg CF.

• The Limit: You can raise up to $5,000,000 in a rolling 12-month period.
• The Rules: You must conduct the raise through an SEC-registered intermediary—specifically, a licensed funding portal or a broker-dealer (such as Republic, Wefunder, or StartEngine).
• Investor Limits: Non-accredited investors face individual caps on how much they can invest based on their annual income or net worth.
• The Disclosure Burden: You must file a formal Form C disclosure with the SEC through your portal, including basic financial statements.

3. Regulation A+ (Reg A+)

Often called a "mini-IPO," Reg A+ allows you to raise larger amounts of capital (up to $20 million or $75 million depending on the tier) from both accredited and non-accredited investors. However, it requires a rigorous SEC qualification process, audited financials, and ongoing reporting, making it cost-prohibitive for a simple friends-and-family round.

Key Steps to Protect Your Business

1. Establish Preexisting Relationships (for 506(b)): Do not tweet about your round or pitch to strangers if you plan to lean on Rule 506(b). Keep a paper trail showing when and how you met your investors.
2. Verify Investor Status: Have investors fill out a comprehensive investor questionnaire/subscription agreement where they explicitly self-certify their financial sophistication or non-accredited status.
3. Hire Startup Counsel: Securities violations carry severe penalties (investors can legally demand their money back plus interest if you botch the exemption). An attorney experienced in SEC Exempt Offerings can draft the proper private placement memorandum (PPM) and handle Blue Sky filings.

If you want to narrow this down, tell me:

• Roughly how much money are you hoping to raise?
• How many non-accredited investors are you expecting to contribute?
• Are these investors close personal contacts , or a broader group?

I can help clarify which filing route fits your goals best.

Legally accepting investments from non-accredited investors (everyday friends, family, or contacts in your network) requires using specific exemptions under U.S. federal securities laws (regulated by the SEC). Because non-accredited investors are deemed to need more regulatory protection, you cannot simply take their money via a standard private handshake deal without triggering strict compliance frameworks.

The primary legal pathways available to accept non-accredited investments include:

• Regulation Crowdfunding (Reg CF): Allows you to raise up to $5 million over a 12-month period. You must conduct the raise through an SEC-registered intermediary (a funding portal or broker-dealer). Non-accredited investors have individual investment limits based on their annual income or net worth.
• Rule 506(b) of Regulation D: Allows an unlimited total raise amount, and you can accept up to 35 non-accredited investors. However, you cannot use general solicitation or public advertising —you must have a pre-existing, substantive relationship with the investors. Furthermore, if you include non-accredited investors, you must provide them with full disclosure documents (similar to what is required in Reg A), which can create significant legal overhead.
• Regulation A (Tier 1 and Tier 2): Often called a "mini-IPO." It allows you to raise up to $20 million (Tier 1) or $75 million (Tier 2) in a 12-month period from both accredited and non-accredited investors. It requires filing an offering circular with the SEC and going through a qualification process, making it more expensive and time-consuming upfront.
• Intrastate Offerings (Rule 147 / 147A): If you and all of your investors reside strictly within a single state, you can raise capital under state-specific laws, though you still must comply with state "blue sky" regulations.

If you'd like to narrow this down, please share:

• How much capital you are looking to raise
• How many non-accredited investors you plan to approach
• Whether you intend to publicly advertise the raise or keep it private within your close network

I can help you evaluate which SEC exemption fits your timeline and budget best.

Yes. If you mean raising money for your company from friends, colleagues, customers, or other people in your network who are not “accredited investors,” there are several legal paths in the U.S. The key is that you generally cannot simply take their money in exchange for equity without fitting within a securities-registration exemption. The SEC's basic rule is that an offering must either be registered or qualify for an exemption.

The main options

1. Rule 506(b) — potentially the simplest for a personal network

This can be attractive if you're raising from people you already know.

You can raise an unlimited amount, but you cannot use general solicitation or advertising. You can sell to up to 35 non-accredited investors, provided those investors meet the required sophistication standard. Non-accredited investors also must receive specified disclosure and financial information.

So, for example, a startup could potentially have:

• 20 accredited investors
• 10 non-accredited friends/business contacts
• One properly documented private offering

But you can't just have everyone sign a SAFE and assume it's legal. The offering needs to be structured to satisfy Rule 506(b), including the disclosure requirements for non-accredited investors.

There's also a Form D filing after the first sale, plus potentially applicable state notice filings and fees.

2. Regulation Crowdfunding — best if you want lots of ordinary investors

Regulation Crowdfunding (Reg CF) expressly permits non-accredited investors to participate. You can currently raise up to $5 million in a 12-month period under the exemption.

The important catch: you must conduct the offering through an SEC-registered broker-dealer or funding portal, and you have prescribed disclosure/filing requirements.

Non-accredited investors are also subject to investment limits. For example, depending on their income/net worth, the current limits generally use a 5% or 10% calculation, with an overall $124,000 12-month cap.

This is probably the cleaner option if your goal is something like:

“I have 100 people in my community who each want to invest $500–$5,000.”

What about Regulation A?

Regulation A is another route that permits non-accredited investors. Tier 1 allows offerings up to $20 million and Tier 2 up to $75 million in a 12-month period. Tier 2 has substantially more disclosure, audited-financial-statement and ongoing-reporting requirements, although it avoids state registration/qualification requirements for the offering.

For most small private-network raises, I'd investigate 506(b) or Reg CF before Regulation A.

One important distinction

Don't confuse “people I know” with “people who can invest under Rule 506(b).”

Having a pre-existing relationship can matter to the securities-law analysis, but it doesn't automatically make someone eligible as a non-accredited investor. The SEC specifically notes that a substantive relationship involves actually having enough information to evaluate the person's sophistication, financial circumstances, and ability to understand the investment—not merely having known them for some period of time.

Also, Rule 506(c) is not the solution for non-accredited investors: it allows general solicitation, but all purchasers must be accredited and their status must be reasonably verified.

What I'd do in your situation

If your goal is something like “I want to raise $250k–$1M from 10–50 people in my existing network, some of whom aren't accredited”, I'd have a securities attorney evaluate a Rule 506(b) offering first.

If instead you're thinking “I want hundreds of people from my network/community to be able to invest $500–$10,000 each”, I'd look seriously at Regulation Crowdfunding.

Before accepting any money, have counsel determine:

1. What security you're selling (SAFE, preferred stock, LLC interests, convertible note, etc.).
2. Which federal exemption you're relying on.
3. Whether each investor qualifies under that exemption.
4. What disclosure documents you need.
5. Which state securities (“blue sky”) filings apply.
6. Whether your solicitation/communications are permissible.
7. How you'll document investor representations and execute the securities.

Don't take checks first and “paper it up later.” Securities-law compliance is much easier when the offering is designed correctly before the first sale.

If you tell me (a) what your company/entity is, (b) roughly how much you're trying to raise, (c) how many investors you expect, (d) their typical investment amount, and (e) whether they're friends/customers/business contacts or essentially strangers, I can map out the most likely structure and compare 506(b) vs. Reg CF for your specific situation.

Non-accredited investors are also subject to investment limits. For example, depending on their income/net worth, the current limits generally use a 5% or 10% calculation, with an overall $124,000 12-month cap.

This is probably the cleaner option if your goal is something like:

“I have 100 people in my community who each want to invest $500–$5,000.”

What about Regulation A?

Regulation A is another route that permits non-accredited investors. Tier 1 allows offerings up to $20 million and Tier 2 up to $75 million in a 12-month period. Tier 2 has substantially more disclosure, audited-financial-statement and ongoing-reporting requirements, although it avoids state registration/qualification requirements for the offering.

For most small private-network raises, I'd investigate 506(b) or Reg CF before Regulation A.

One important distinction

Don't confuse “people I know” with “people who can invest under Rule 506(b).”

Having a pre-existing relationship can matter to the securities-law analysis, but it doesn't automatically make someone eligible as a non-accredited investor. The SEC specifically notes that a substantive relationship involves actually having enough information to evaluate the person's sophistication, financial circumstances, and ability to understand the investment—not merely having known them for some period of time.

Also, Rule 506(c) is not the solution for non-accredited investors: it allows general solicitation, but all purchasers must be accredited and their status must be reasonably verified.

What I'd do in your situation

If your goal is something like “I want to raise $250k–$1M from 10–50 people in my existing network, some of whom aren't accredited”, I'd have a securities attorney evaluate a Rule 506(b) offering first.

If instead you're thinking “I want hundreds of people from my network/community to be able to invest $500–$10,000 each”, I'd look seriously at Regulation Crowdfunding.

Before accepting any money, have counsel determine:

1. What security you're selling (SAFE, preferred stock, LLC interests, convertible note, etc.).
2. Which federal exemption you're relying on.
3. Whether each investor qualifies under that exemption.
4. What disclosure documents you need.
5. Which state securities (“blue sky”) filings apply.
6. Whether your solicitation/communications are permissible.
7. How you'll document investor representations and execute the securities.

Don't take checks first and “paper it up later.” Securities-law compliance is much easier when the offering is designed correctly before the first sale.

If you tell me (a) what your company/entity is, (b) roughly how much you're trying to raise, (c) how many investors you expect, (d) their typical investment amount, and (e) whether they're friends/customers/business contacts or essentially strangers, I can map out the most likely structure and compare 506(b) vs. Reg CF for your specific situation.

Assuming you mean U.S. investors investing in your company, yes—you can legally accept money from non-accredited investors, but you need to structure the offering under a securities-law exemption. You generally cannot simply take checks from friends/family in exchange for equity without complying with federal and state securities laws.

The main routes

1. Rule 506(b) may be the simplest for a private network

If you're talking about a relatively small group of people you already know, Rule 506(b) is worth looking at.

You can raise an unlimited amount, sell to unlimited accredited investors, and include up to 35 non-accredited investors, provided those non-accredited investors meet the applicable sophistication requirements and you satisfy the disclosure requirements. You also cannot generally advertise or publicly solicit the offering.

This can work particularly well for a founder raising, say, $500k–$3M from a network of acquaintances, customers, business contacts, etc.

Importantly, "I know them personally" isn't by itself what makes the offering compliant. You need to structure the offering and communications correctly.

2. Regulation Crowdfunding is designed for non-accredited investors

Under Regulation Crowdfunding (Reg CF), you can raise up to $5 million in a 12-month period. Non-accredited investors can participate, subject to individual investment limits. The offering must go through an SEC-registered broker-dealer or funding portal, and you'll have disclosure and filing obligations.

This is attractive if you want a larger number of ordinary people to invest, rather than carefully selecting a handful of investors.

For example, someone earning $80,000 with $100,000 of net worth could potentially invest under the applicable Reg CF formula, while someone with both income and net worth of at least $124,000 has a higher limit. There's also a $124,000 aggregate 12-month cap for an individual non-accredited investor across Reg CF offerings.

3. Regulation A if you're contemplating a much larger public raise

Regulation A can accommodate non-accredited investors on a much larger scale.

• Tier 1: up to $20M in 12 months.
• Tier 2: up to $75M in 12 months.
• Tier 2 generally limits a non-accredited investor to 10% of the greater of annual income or net worth (with special rules for entities), unless an applicable exception applies.

It's substantially more involved than a typical private seed round because of qualification, disclosure, financial-statement, and ongoing-reporting requirements.

What I'd consider for your situation

If by "my network" you mean 20–50 people you personally know, I'd first have a securities attorney compare:

Option A — 506(b): Private, relationship-based round; potentially the cleanest route if most investors are accredited and you have only a limited number of sophisticated non-accredited investors.

Option B — Reg CF: Better if you specifically want ordinary/non-accredited members of your network to participate without having to satisfy the 506(b) sophistication requirements.

The distinction is important because you shouldn't try to make a 506(b) offering and then promote it publicly on LinkedIn, Instagram, email blasts, etc. Rule 506(b) prohibits general solicitation.

Also, don't assume that calling the investment a SAFE, convertible note, revenue share, LLC membership, or "friends and family investment" makes securities laws disappear. The legal treatment depends on the actual arrangement.

A practical compliant process

Before accepting money, I'd have counsel help you:

1. Determine whether what you're selling is a security.
2. Choose the exemption (likely 506(b) vs. Reg CF for your fact pattern).
3. Prepare the appropriate offering documents and disclosures.
4. Determine which prospective investors are accredited and, for 506(b), which non-accredited investors satisfy the applicable requirements.
5. Make sure your pitch deck, emails, website, and conversations comply with the chosen exemption.
6. Handle Form D and state blue-sky filings where required.
7. Use proper subscription/investment agreements and maintain a cap table.
8. Have investors sign the required representations and risk disclosures before accepting funds.

One wrinkle: the SEC's current accredited-investor thresholds include, among other things, >$1M net worth excluding a primary residence or >$200k individual/$300k joint income in each of the preceding two years with an expectation of the same in the current year.

If you tell me (1) how much you're trying to raise, (2) roughly how many investors, (3) whether they're friends/family, customers, employees, or broader contacts, and (4) what you're offering them—equity, SAFE, convertible note, LLC units, etc.—I can map out which exemption is likely the best fit and what the process would look like. This is an area where a securities lawyer should review the actual offering before you take money.

The distinction is important because you shouldn't try to make a 506(b) offering and then promote it publicly on LinkedIn, Instagram, email blasts, etc. Rule 506(b) prohibits general solicitation.

Also, don't assume that calling the investment a SAFE, convertible note, revenue share, LLC membership, or "friends and family investment" makes securities laws disappear. The legal treatment depends on the actual arrangement.

Under Regulation Crowdfunding (Reg CF), you can raise up to $5 million in a 12-month period. Non-accredited investors can participate, subject to individual investment limits. The offering must go through an SEC-registered broker-dealer or funding portal, and you'll have disclosure and filing obligations.

This is attractive if you want a larger number of ordinary people to invest, rather than carefully selecting a handful of investors.

For example, someone earning $80,000 with $100,000 of net worth could potentially invest under the applicable Reg CF formula, while someone with both income and net worth of at least $124,000 has a higher limit. There's also a $124,000 aggregate 12-month cap for an individual non-accredited investor across Reg CF offerings.

3. Regulation A if you're contemplating a much larger public raise

Regulation A can accommodate non-accredited investors on a much larger scale.

You can legally accept investments from non-accredited investors using specific federal exemptions like Rule 506(b) of Regulation D (up to 35 non-accredited investors who must be sophisticated) or Regulation Crowdfunding (Reg CF) , though both require strict adherence to federal and state laws.

Because private securities offerings are heavily regulated by the Securities and Exchange Commission (SEC), you must use a registered exemption rather than a standard public sale.

Legal Pathways for Non-Accredited Investors

• Rule 506(b) (Regulation D): Allows you to raise an unlimited amount of money and include up to 35 non-accredited investors . However, these non-accredited investors must have sufficient knowledge and experience in financial and business matters to evaluate the risks and merits of the investment (known as "sophistication"). You also cannot use general solicitation or advertising.
• Regulation Crowdfunding (Reg CF): Allows you to raise up to $5 million through an SEC-registered funding portal or broker-dealer. Non-accredited investors can participate freely subject to investment limits based on their income or net worth, but you must publicly disclose financial statements and offering details.
• Rule 504 (Regulation D): Permits raising up to $10 million in a 12-month period, which can include non-accredited investors under federal law, but it is tightly controlled or restricted by individual state "Blue Sky" laws.

Key Requirements & Challenges

• Financial Disclosures: Under Rule 506(b), if you include non-accredited investors, you must provide them with extensive disclosure documents (similar to a registered offering circular), which significantly increases accounting and legal costs.
• State "Blue Sky" Laws: Federal exemptions do not automatically override state laws. You must check and comply with the securities laws of every state where your non-accredited investors reside.
• Investor Sophistication: For 506(b) offerings, you must reasonably believe—and be able to prove—that your non-accredited investors (or their financial representatives) are sophisticated enough to protect their own interests.

If you'd like, share:

• Your target raise amount
• Whether you plan to publicly advertise the round

I can help you determine which specific regulatory exemption fits your fundraising goals.

Yes. Assuming you mean investing in your U.S. company in exchange for equity, LLC interests, SAFEs, convertible notes, or another security, you can legally take money from non-accredited investors—but you need to structure the offering around a securities-law exemption.

The three routes I'd look at first are:

1. Rule 506(b) is often the simplest for a personal network

You can raise an unlimited amount under Rule 506(b), and you can include up to 35 non-accredited investors. However, those non-accredited investors must have sufficient financial/business knowledge and experience to evaluate the investment, or invest with a purchaser representative.

There are important conditions:

• No general solicitation or advertising. You generally need to have a substantive pre-existing relationship with the investors rather than publicly advertising the investment opportunity.
• Non-accredited investors must receive substantially more disclosure than accredited investors, including specified financial information.
• The securities will generally be restricted securities, meaning investors can't freely resell them.
• You need to file Form D with the SEC within 15 days after the first sale, plus comply with applicable state securities filings/fees.
• You also need to comply with anti-fraud rules and the exemption's "bad actor" provisions.

For a founder saying, "I have 10–20 people I know who want to invest $5k–$50k each," 506(b) is often the first structure worth discussing with a securities attorney.

2. Regulation Crowdfunding is another straightforward option

Reg CF lets eligible companies raise up to $5 million in a 12-month period from accredited and non-accredited investors. But the offering must go through an SEC-registered broker-dealer or funding portal.

Non-accredited investors have investment limits based on their income/net worth. For example, under the current SEC guidance, if either income or net worth is below $124,000, the limit is generally the greater of $2,500 or 5% of the greater amount; if both are at least $124,000, the limit is generally 10%, subject to an overall $124,000 12-month cap.

The tradeoff is more public disclosure and administrative overhead, but it can be attractive if you want to let lots of people—including people outside your existing network—invest.

3. Regulation A can accommodate non-accredited investors

Regulation A has two tiers:

• Tier 1: up to $20 million in 12 months.
• Tier 2: up to $75 million in 12 months.

Tier 2 permits non-accredited investors, but generally limits their investment to 10% of the greater of annual income or net worth (for individuals). Tier 2 also involves audited financial statements and ongoing SEC reporting.

For a typical startup raising a relatively modest round from friends, customers, or professional contacts, this is usually much more machinery than necessary.

What I would not do

Don't simply create an LLC, give people an ownership percentage in exchange for checks, and assume that because they're "friends and family" securities laws don't apply.

The SEC's basic rule is that an offer/sale of securities must either be registered or qualify for an exemption.

Also, don't have an investor simply check a box saying they're accredited. If you're relying on an exemption that requires accredited investors, the SEC has specific standards for determining/confirming accredited status.

A practical path for your situation

If your goal is something like:

"I want to raise $250k–$1M from 10–30 people in my existing network, some of whom aren't accredited." I'd typically investigate Rule 506(b) first.

The process would roughly be:

1. Determine exactly what you're selling — preferred stock, common stock, LLC interests, SAFE, convertible note, etc.
2. Determine who is investing and which investors are accredited vs. non-accredited.
3. Confirm the exemption with a securities attorney before soliciting investments.
4. Prepare the appropriate offering documents and disclosures.
5. Make sure your communications with prospective investors don't inadvertently constitute prohibited general solicitation.
6. Conduct the investor suitability/accreditation process.
7. Accept funds and issue the securities according to the documents.
8. Make the required Form D and state filings.
9. Maintain appropriate investor records and ongoing reporting.

One particularly important point: the legal structure of the investment matters. A SAFE, convertible note, stock issuance, LLC membership interest, and revenue-share agreement can have different securities-law and tax consequences.

If you tell me (a) your state, (b) what your company is—a C-corp, S-corp, or LLC, (c) roughly how much you want to raise, (d) how many investors, and (e) whether they're mostly friends/customers/business contacts, I can lay out the most likely exemption and the compliance steps/costs to discuss with your attorney.

Also, don't have an investor simply check a box saying they're accredited. If you're relying on an exemption that requires accredited investors, the SEC has specific standards for determining/confirming accredited status.

A practical path for your situation

If your goal is something like:

"I want to raise $250k–$1M from 10–30 people in my existing network, some of whom aren't accredited." I'd typically investigate Rule 506(b) first.

The process would roughly be:

Accepting investments from non-accredited investors (friends, family, and network contacts who don't meet the SEC's wealth/income thresholds) is legally possible in the U.S., but it requires strict adherence to specific federal and state exemptions. Because non-accredited investors are viewed as needing higher regulatory protection, failing to follow these pathways can lead to severe penalties or rescission rights (where investors can demand their money back).[1][2][3][4][5]

The primary legal mechanisms to achieve this include:

• Rule 506(b) of Regulation D : Allows an unlimited amount of total capital to be raised from an unlimited number of accredited investors, plus up to 35 non-accredited investors.
  • Crucial Rule: You cannot use general solicitation or public advertising (no social media blasts, public pitch events, etc.). You must have a pre-existing, substantive relationship with the investors.
  • Disclosure Burden: If you include even one non-accredited investor under Rule 506(b), you must provide all investors with extensive disclosure documents (comparable to Regulation A tier info), including audited financial statements, which can be expensive.
  • Sophistication: Every non-accredited investor (either alone or with a purchaser representative) must have sufficient knowledge and experience in financial and business matters to evaluate the risks of the investment. [1][2][3][4][5]
• Regulation Crowdfunding (Reg CF) : Allows you to raise up to a specific indexed cap (currently $5 million) in a 12-month period publicly from both accredited and non-accredited investors.
  • Crucial Rule: You must use an SEC-registered intermediary (a funding portal or broker-dealer like Wefunder, StartEngine, etc.).
  • Disclosure Burden: Requires filing Form C with the SEC, providing financial statements (sometimes reviewed or audited by a CPA depending on the raise amount), and ongoing reporting.[1][2][3][4][5]
• Regulation A (Reg A+ / Tier 1 and Tier 2) : A mini-IPO framework allowing you to raise up to $20 million (Tier 1) or $75 million (Tier 2) in a 12-month period from the general public, including non-accredited investors.
  • Crucial Rule: Requires qualification (approval) of an offering circular by the SEC. It is legally complex, time-consuming, and typically requires legal counsel and audited financials.[1][2][3][4][5]
• Intrastate Offerings (Rule 147 / Section 3(a)(11)) : If both you (the issuer) and all of your investors reside within the exact same state, you can rely on state-specific intrastate crowdfunding or exemption rules.
  • Crucial Rule: The business must be incorporated in that state and do a significant amount of its business operations there.[1][2][3][4]

Practical Steps to Stay Compliant

To help narrow down the best path, could you share:

• How much total capital you are looking to raise?
• How many non-accredited investors from your network are looking to participate?
• Where your business and these investors are geographically located?

Legally accepting investments from non-accredited investors (friends, family, and community members in your network) requires navigating strict federal and state securities laws. Because securities laws treat the public as vulnerable to fraud, you cannot simply take a check from anyone without an exemption.

To do this legally in the U.S., you must utilize specific exemptions provided by the SEC. The three most viable paths include:

• Regulation D, Rule 506(b) : This traditional private placement allows you to accept up to 35 non-accredited investors alongside an unlimited number of accredited investors.
  • The Catch : You cannot use general solicitation (no public social media posts, ads, or open event pitches). You must have a pre-existing, substantive relationship with the investors. Furthermore, if you include even one non-accredited investor, you must provide all investors with heavy financial and business disclosures (similar to a registered offering), which can be legally expensive and complex.
• Regulation Crowdfunding (Reg CF) : This allows you to raise up to $5 million in a 12-month period from both accredited and non-accredited investors.
  • The Catch : You must conduct the raise through an SEC-registered intermediary—either a funding portal or a broker-dealer (like Wefunder or StartEngine). Non-accredited individual investments are capped based on their income/net worth limits, and you are required to file formal disclosure documents (Form C) with the SEC.
• Regulation A (Reg A+ / Tier 1 or Tier 2) : This functions like a "mini-IPO" allowing you to raise up to $20 million (Tier 1) or $75 million (Tier 2) from the general public, including non-accredited investors.
  • The Catch : It requires a formal qualification process/filing with the SEC, audited financials, and ongoing reporting, making it cost-prohibitive for small, early-stage capital asks.

Summary Checklist Before Taking Money

1. Establish the Relationship : If using Rule 506(b), ensure you have a documented, genuine, pre-existing relationship with the unaccredited person showing they are "sophisticated" enough to understand the risks.
2. Check State "Blue Sky" Laws : Federal exemptions do not automatically clear state laws. You must verify compliance in every state where your non-accredited investors reside.
3. Draft Proper Securities Documentation : You will need a Subscription Agreement, Investor Suitability Questionnaire, and a PPM (Private Placement Memorandum) or operating agreement outlining the extreme risk of total loss.

If you tell me how much capital you are hoping to raise and roughly how many non-accredited investors you have in mind, I can help point you toward the most cost-effective legal exemption structure.

Yes. In the U.S., you can legally raise money from non-accredited investors, but the exemption you use determines how you can solicit them, how much they can invest, and what disclosures you must provide.

The key point: you generally can't just take checks from friends and acquaintances because they're in your network. The sale of an LLC interest, stock, SAFE, convertible note, etc. is usually a securities transaction, so you need a registration exemption.

The main options

1. Rule 506(b) — often the most practical for a private network

This can work particularly well if you're raising from people you already know.

Under Rule 506(b):

• You can raise an unlimited amount.
• You can have up to 35 non-accredited investors in the offering, provided they meet the rule's sophistication requirements.
• You cannot use general solicitation or advertising.
• Non-accredited investors must receive substantial disclosure, generally comparable to the information required in a Regulation A offering, plus specified financial statements.
• Securities are generally restricted.
• You file Form D after the first sale, and state notice/fee requirements may also apply.

So, for example, if you have 15 people in your personal/business network who want to invest $10,000–$50,000 each, 506(b) may be worth exploring.

Importantly, simply being someone you know doesn't make them accredited. The SEC's current accredited-investor criteria include, among other things, $1M+ net worth excluding the primary residence or income exceeding $200,000 individually/$300,000 jointly in each of the prior two years with an expectation of the same level in the current year.

2. Regulation Crowdfunding — useful if you want lots of smaller investors

Regulation Crowdfunding (Reg CF) permits eligible companies to raise up to $5 million in a 12-month period from both accredited and non-accredited investors.

There are important requirements:

• The offering must occur through a single SEC-registered broker-dealer or funding portal.
• You file a Form C and provide specified financial and business disclosures.
• Non-accredited investors have investment limits.
• Securities generally can't be resold for one year.

As of the SEC's current guidance, a non-accredited investor whose income or net worth is below $124,000 generally has a 12-month limit equal to the greater of $2,500 or 5% of the greater of income or net worth. If both are at least $124,000, the limit is 10% of the greater of income or net worth, subject to a $124,000 overall cap across Reg CF offerings.

This is attractive if you want to let dozens or hundreds of people in your broader network participate rather than keeping the round tightly private.

3. Regulation A — more expensive, but designed for broader participation

Regulation A can accommodate non-accredited investors and much larger offerings.

• Tier 1: up to $20 million in 12 months.
• Tier 2: up to $75 million in 12 months.
• Tier 2 permits non-accredited investors, but generally limits them to 10% of the greater of annual income or net worth.
• Tier 2 involves significantly more disclosure and ongoing reporting, including audited financial statements.

For a relatively small startup round among people you know, this is usually more infrastructure than you need.

What I'd consider for your situation

If by "my network" you mean friends, former colleagues, customers, business contacts, and other people you personally know, I'd first have a securities attorney evaluate a Rule 506(b) private placement.

A typical structure might look like:

Your company → private offering under Rule 506(b) → investment agreement/SAFE/note/equity → investors

You'd want counsel to handle things such as:

1. Determining whether the security you're selling is a stock interest, LLC interest, SAFE, note, etc.
2. Choosing the appropriate federal exemption.
3. Determining which investors are accredited versus non-accredited.
4. Preparing the offering/disclosure documents.
5. Making sure the non-accredited investors satisfy the applicable sophistication requirements.
6. Checking your state's securities ("blue sky") requirements.
7. Filing Form D and any required state notices.
8. Making sure your communications with prospective investors don't inadvertently constitute prohibited general solicitation.
9. Handling investor suitability, subscription documents, representations, and funds.

One important trap

Don't assume that "I'm only talking to people I know" = legal.

For example, if you're doing a 506(b) offering, publicly posting something like:

"I'm raising $500K for my startup. DM me if you'd like to invest." can create a serious problem because 506(b) prohibits general solicitation. The SEC specifically distinguishes 506(b), which prohibits general solicitation, from 506(c), which permits it but requires all purchasers to be accredited and the issuer to take reasonable steps to verify that status.

If you tell me (1) what you're raising, (2) roughly how much, (3) how many investors you expect, (4) whether they're friends/contacts versus the general public, and (5) what state your company is organized in, I can walk you through which exemption is likely to fit and what the process would look like. This is an area where getting a securities lawyer involved before accepting money is very worthwhile.

"I'm raising $500K for my startup. DM me if you'd like to invest." can create a serious problem because 506(b) prohibits general solicitation. The SEC specifically distinguishes 506(b), which prohibits general solicitation, from 506(c), which permits it but requires all purchasers to be accredited and the issuer to take reasonable steps to verify that status.