New Jersey Intrastate Offering (Crowdfunding) FAQs

If you're an entrepreneur in need of capital for your business, one option you may wish to consider is doing an intrastate (crowdfunding) offering. In New Jersey, an exemption from securities registration is available to allow a business to raise up to $1,000,000 in capital in a twelve month period by selling an interest in your business.

Because the Intrastate Offering (Crowdfunding) Exemption is premised upon the offering qualifying for a specific exemption for "intrastate" offerings of securities under federal law, this webpage will first discuss the requirements of that federal exemption. The remainder of this webpage will discuss the basic requirements for using the Intrastate Offering (Crowdfunding) Exemption under New Jersey law. Please note that the text of this webpage contains hyperlinks to other sources of information you may wish to review.

Getting Started

1. What are the federal requirements for doing an intrastate (crowdfunding) offering under New Jersey law?

   In order for an offering to qualify for New Jersey's Intrastate Offering (Crowdfunding) Exemption, the transaction must meet the requirements for the Federal exemption for intrastate offerings under Section 3(a)(11) of the Securities Act of 1933 and 17 C.F.R. s.230.147 adopted thereunder.  Section 3(a)(11) provides an exemption from the securities registration requirements under federal law for offers and sales of securities that are made to residents of a single state where the issuer is organized and doing business within that same state.  Rule 147 provides further guidance as to the availability of this exemption.

   If the offering may otherwise qualify under these federal provisions, the next step is to understand the state level requirements for offerings under the New Jersey Intrastate Offering (Crowdfunding) Exemption. These requirements are discussed below.

2. What are the conditions to qualify for the New Jersey Intrastate Offering (Crowdfunding) Exemption?
   

   For an offering to qualify for the transaction exemption set forth in N.J.S.A. 49:3-50(b)(14), the following conditions must be met:

   • The issuer is a business entity organized under the laws of this State and authorized to do business in this State;
   
   
   • The transaction meets the requirements for the Federal exemption for intrastate offerings in section 3(a)(11) of the Federal Securities Act of 1933 (15 U.S.C. s.77c(a)(11)), and Rule 147 adopted under the Securities Act of 1933 (17 C.F.R. 230.147);
   
   
   • The sum of all cash and other consideration to be received for all sales of the security in reliance on the exemption under N.J.S.A. 49:3-50(b)(14), excluding sales to any accredited investor or institutional investor, does not exceed $1,000,000.00;¹
   
   
   • The offering is not a blind pool;
   
   
   • The offering by the issuer is made exclusively through a single Internet site operator which meets the requirements of N.J.A.C. 13:47A-12A.4;
   
   
   • The issuer does not accept an investment of more than $5,000.00 from any single investor unless the investor is an accredited investor, as defined by N.J.S.A. 49:3-49(p) or institutional buyer, as defined by N.J.S.A. 49:3-49(t);
   
   
   • The investor in the security is a resident of this State;²

3. What requirements do I have to follow to use the crowdfunding exemption?

   In order to claim the Intrastate Offering (Crowdfunding) Exemption, issuers must first file with the Bureau of Securities a complete  New Jersey Intrastate Offering (Crowdfunding) Exemption Form and other exhibits required by N.J.A.C. 13:47A-12A.5. The filing must be accompanied by a fee of $250.  

   The New Jersey Intrastate Offering (Crowdfunding) Exemption Form consists of two subparts, Part A and Part B.  Part A contains the information regarding the issuer's compliance with the terms and conditions of N.J.S.A. 49:3-50(b)(14).  Part B contains the information required to be disclosed pursuant to N.J.A.C. 13:47A-12A.5(a), and described below.  An issuer may provide a copy of Part B to prospective investors and investors.  If completed accurately and in its entirety, Part B should contain the information required to be disclosed by the issuer to investors pursuant to N.J.A.C. 13:47A-12A.5(a), and may directly be posted by the issuer on the Internet site operator's website.

   The issuer shall provide, and the Internet site operator shall publish on its internet site through which the offering is made, the following information to the prospective investors in writing:

   • A copy of the legend; 
   
   
   • Evidence that the issuer is a business organization organized under the laws of this State and is authorized to do business in this State;
   
   
   • A description of the company, which includes: (a) the form and date of business organization; (b) the address and telephone number of its principal office; (c) its history; (d) a business plan; (e) a description of material agreements; and (f) a description of the intended use of the offering proceeds, at least 65 percent of which shall be specifically disclosed in dollar amount and percentage terms in a Use of Proceeds section and which shall also include any amounts to be paid, as compensation or otherwise, to any owner, executive officer, director, managing member, or other person occupying a similar status or performing similar functions on behalf of the issuer;
   
   
   • The identity of each person owning more than 10 percent of the ownership interests of any class of securities of the company, with a description of options or other contingent securities outstanding and a description of the amount of those options or other contingent securities that those persons own;
   
   
   • The identity of the executive officers, directors, managing members, and other persons occupying a similar status or performing similar functions in the name of and on behalf of the issuer, including their titles and their prior experience, with a description of options or other contingent securities outstanding and a description of the amount of those options or other contingent securities that those persons own;
   
   
   • The terms and conditions of the securities being offered and of any outstanding securities of the company, the minimum and maximum amount of securities being offered, if any, and the percentage ownership of the company represented by the offered securities and the valuation of the company implied by the price of the offered securities.  The minimum and maximum amount of securities being offered shall be stated in both dollars and number of shares or units;
   
   
   • The minimum offering amount, stated in both dollars and number of shares or units, that is necessary to implement the business plan, and a notice that the funds will only be released to the issuer if the minimum offering amount is reached;
   
   
   • The time and date, which may be no more than 12 months from the date of the offering, by which the minimum offering amount, stated in both dollars and number of shares or units, must be reached before the funds will be returned to investors;
   
   
   • A provision stating that the investors may cancel their commitment to invest for up to 30 days following the date the investment is made, except that investors who invest within 30 days of the time and date by which the minimum offering amount must be reached as provided in paragraph 8 of this subsection shall only have the amount of time left before the time and date by which the minimum offering amount must be reached in which to cancel their commitment to invest, even if that amount of time is less than 30 days;
   
   
   • The identity and description of the consideration being paid, of any person who has been or will be retained by the issuer to assist the issuer in conducting the offering and sale of the securities, including any Internet Site Operator, but excluding persons acting solely as accountants or attorneys and employees whose primary job responsibilities involve the operating business of the issuer, rather than assisting the issuer in raising capital;
   
   
   • A description of any litigation or legal proceedings involving the company or its management;
   
   
   • A discussion of significant factors that make the offering speculative or risky;
   
   
   • A description of any conflicts of interest;
   
   
   • Financial statements, including a balance sheet, income statement, cash flow statement, and capitalization of issuer;
   
   
   • A statement of current liabilities outstanding, including obligations past due and obligations due within 12 months;
   
   
   • The internet site address, if applicable, at which the quarterly report required will be made available; and
   
   
   • Any additional information material to the offering.

   
   

   The Bureau of Securities may also request additional documentation after reviewing these materials.

Advertising Requirements

4. May an issuer advertise the offering?

   An issuer may not advertise the terms of the offering, except exclusively on the internet site of the Internet site operator.  However, a notice may advertise an issuer's offering if it directs investors to the Internet site operator's internet site and includes only the following information:

   • A statement that the issuer is conducting an offering pursuant to N.J.S.A. 49:3-50(b)(14), the name of the Internet site operator through which the offering is being conducted, and a link directing the potential investor to the Internet site operator's internet site; and

   Factual information about the legal identity and business location of the issuer, limited to the name of the issuer of the security, the address, website of the issuer, and a brief description of the business of the issuer.

5. Are there any restrictions on advertising materials?

   Yes.  An issuer and persons acting on behalf of the issuer may not advertise the terms of an offering made pursuant to N.J.S.A. 49:3-50(b)(14) except for by the means outlined in N.J.A.C. 13:47A-12A.9 (FAQ #4, above).

6. Can I use Facebook, Twitter, and other social media platforms to advertise my intrastate (crowdfunding) offering?

   Yes, as long as it is in compliance with N.J.A.C. 13:47A-12A.9(b) (FAQ #4, above).

7. May I advertise prior to distributing the Intrastate Offering (Crowdfunding) Exemption Form to prospective investors?

   No.

Advertising Requirements

8. Are issuers relying on the Intrastate Offering (Crowdfunding) Exemption required to use the services of an Internet site operator?

   Yes.  An offering under the New Jersey Intrastate Offering (Crowdfunding) Exemption must be made by the issuer exclusively through a single Internet site operator which meets the requirements of N.J.A.C. 13:47A-12A.4, unless the issuer is using the services of a broker-dealer registered with the Bureau.

9. Must the Internet site operator file anything with the Bureau?

   Yes.  Pursuant to N.J.A.C. 13:47A-12A.4, an Internet site operator must submit the following to the Bureau:

   • The Internet Site Operator Registration Form, which includes a consent to service of process provision; and
   
   
   • A check made payable to the State of New Jersey, Bureau of Securities in the amount of $1,000.00.

10. Must the Internet site operator be registered as a broker-dealer in New Jersey?

    • It does not offer investment advice or recommendations;
    
    
    • It does not solicit purchases, sales, or offers to buy the securities offered or displayed on the internet site;
    
    
    • It does not compensate employees, agents, or other persons for the solicitation or based on the sale of securities displayed or referenced on the internet site
    
    
    • It is not compensated based on the amount of securities sold, and it does not hold, manage, possess, or otherwise handle investor funds or securities;
    
    
    • The fee it charges an issuer for an offering of securities on the internet site is a fixed amount for each offering, a variable amount based on the length of time that the securities are offered on the internet site, or a combination of such fixed and variable amounts;
    
    
    • It does not identify, promote, or otherwise refer to any individual security offered on the internet site in any advertising for the internet site; and
    
    
    • Neither the Internet site operator, nor any director, executive officer, general partner, managing member, or other person with management authority over the Internet site operator, has been subject to any conviction, order, judgment, decree, or other action specified in Rule 506(d)(1) adopted under the "Securities Act of 1933" (17 C.F.R. 230.506(d)(1)) that would disqualify an issuer under Rule 506(d) adopted under the "Securities Act of 1933" (17 C.F.R. 230.506(d)) from claiming an exemption specified in Rule 506(a) to (c) adopted under the "Securities Act of 1933" (17 C.F.R. 230.506(a) to (c)).

    
    

    An Internet site operator registered with the Bureau in accordance with the above is not required to register as a broker-dealer in New Jersey if the Internet site operator is registered as a broker-dealer under the Securities Exchange Act of 1934 (15 U.S.C. s. 78o) or is a funding portal registered under the Securities Act of 1933 (15 U.S.C. s.77d) and the rules adopted by the Securities and Exchange Commission under authority of section 3(h) of the Securities Exchange Act of 1934 (15 U.S.C. s.78c(h)) and Pub.L. 112-106, section 304.

     

11. What is a funding portal?

    The term "funding portal" means any person acting as an intermediary in a transaction involving the offer or sale of securities for the account of others, solely pursuant to section 4(6) of the Securities Act of 1933 that does not:

    • Offer investment advice or recommendations;
    
    
    • Solicit purchases, sales, or offers to buy the securities offered or displayed on its website or portal;
    
    
    • Compensate employees, agents, or other persons for such solicitation or based on the sale of securities displayed or referenced on its website or portal;
    
    
    • Hold, manage, possess, or otherwise handle investor funds or securities; or
    
    
    • Engage in such other activities as the Commission, by rule, determines appropriate.

12. May an Internet site operator charge a fee for its services?

    Yes, as long as the fee it charges an issuer for an offering of securities on the internet site is a fixed amount for each offering, a variable amount based on the length of time that the securities are offered on the internet site, or a combination of such fixed and variable amounts.The Internet site operator may NOT be compensated based on the amount of securities sold.

Investor Limits and Rights

13. Can I have an unlimited number of investors?

    There is no restriction under New Jersey law as to the number of investors that may invest in an intrastate (crowdfunding) offering.  However, the sum of all cash and other consideration to be received for all sales of the security in reliance on the exemption under N.J.S.A. 49:3-50(b)(14), excluding sales to any accredited investor or institutional investor, may not exceed $1 million during any 12-month period.  The offer or sale to an officer, director, partner, trustee, or individual occupying similar status or performing similar functions with the issuer or to a person owning 10% or more of the outstanding securities of the issuer is not counted toward the aggregate monetary limitation.

14. How much money can I raise from each investor?

    An issuer may receive an investment of no more than $5,000.00 from any single investor unless the investor is an accredited investor or institutional buyer.

Financial Statements

15. What are the financial statement requirements under the New Jersey Intrastate (Crowdfunding) Exemption?

    The issuer seeking to offer the intrastate (crowdfunding) exempt securities must provide, and the Internet site operator must publish on its internet site through which the securities offering is made, financial statements that include:

    • A balance sheet, income statement, cash flow statement, and capitalization of the issuer; and
    
    
    • A statement of current liabilities outstanding, including obligations past due and obligations due within 12 months.

    
    Per N.J.S.A. 49:3-67(c), all financial statements shall be prepared in accordance with generally accepted accounting practices.

Offering Limits

16. How much money can my company raise in an intrastate (crowdfunding) offering?

    An issuer is permitted to raise up to $1 million in an intrastate (crowdfunding) offering during any 12 month period using the Intrastate Offering (Crowdfunding) Exemption. There is no limit on the number of intrastate (crowdfunding) offerings an issuer may conduct, but the most that can be raised in an intrastate (crowdfunding) offering during any 12-month period is $1 million.

17. Must the intrastate (crowdfunding) offering be made online or otherwise use a crowdfunding portal?

    An offering under the New Jersey Intrastate Offering (Crowdfunding) Exemption must be made by the issuer exclusively through a single Internet site operator which meets the requirements of N.J.A.C. 13:47A-12A.4.

Other

18. May the Bureau revoke an Intrastate Offering (Crowdfunding) Exemption?

    Yes. In accordance with N.J.S.A. 49:3-50(c), the Bureau Chief may, by rule or order, deny or revoke any exemption pursuant to N.J.S.A. 49:3-50(b)