This guide is general information, not legal, tax or investment advice. Your operating agreement, offering documents, counsel and CPA govern your deal.
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The short version
Most US real estate syndications and private funds raise under Rule 506 of Regulation D. It lets you raise an unlimited amount from an unlimited number of accredited investors without registering the offering with the SEC. Rule 506 has two paths, and the choice decides how you can market the deal.
| Topic | Rule 506(b) | Rule 506(c) |
|---|---|---|
| General solicitation | Not allowed | Allowed |
| Accredited investors | Unlimited | Unlimited |
| Non-accredited investors | Up to 35, each sophisticated | None |
| Accreditation | Reasonable belief, usually self-certified | Reasonable steps to verify |
| Extra disclosure | Required if any non-accredited investor buys | Not required by Rule 506 |
| Form D | Within 15 days of first sale | Within 15 days of first sale |
Rule 506(b): relationships, not advertising
Under 506(b) you may not use general solicitation or general advertising. That rules out public deal pages, social posts about the offering, open webinars, press releases and cold outreach that describes the deal.
The usual way to show you did not generally solicit is a pre-existing, substantive relationship: one you formed before the offering, through which you learned enough about the investor’s finances and experience to judge whether the deal suits them. Keep records of how and when each relationship started. A sign-up form, a questionnaire and a waiting period before you show a deal is a common pattern; whether it is enough for your facts is a question for counsel.
Accredited investors in a 506(b) offering are usually self-certified through a questionnaire. You need a reasonable belief that each one is accredited, not documentary proof.
Non-accredited investors in 506(b)
A 506(b) offering may include up to 35 non-accredited purchasers. Each must be sophisticated, meaning they have enough financial and business experience to evaluate the risks, alone or with a purchaser representative.
Admitting even one non-accredited investor triggers disclosure requirements under Rule 502(b): broadly, information similar to what a registered offering would provide, including financial statements, plus an opportunity to ask questions. For a small sponsor this cost is often why 506(b) deals stay accredited-only in practice.
Rule 506(c): advertise, then verify
Under 506(c) you may market the offering publicly: deal pages, email lists, social media, podcasts and ads. In exchange, every purchaser must be accredited, and you must take reasonable steps to verify it. A checkbox is not enough.
The rule lists non-exclusive safe-harbour methods for natural persons:
- Income: review IRS forms such as W-2s, 1099s or tax returns for the two most recent years, plus a written representation that the investor expects to qualify this year.
- Net worth: review bank, brokerage and similar statements and a consumer credit report, dated within the prior three months, plus a written representation that all liabilities were disclosed.
- Third-party letter: a written confirmation, dated within the prior three months, from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney or a CPA who has verified the investor’s status.
- Principles-based: any other reasonable process, weighing the type of investor, the information you have and the terms of the offering, including the minimum investment.
The 2025 staff guidance on minimum investments
In March 2025 the staff of the SEC’s Division of Corporation Finance issued a no-action letter and updated interpretations on the principles-based method. In the staff’s view, an issuer may reasonably conclude it has taken reasonable steps to verify when the minimum investment is high enough and the investor gives specific written representations. The facts in the letter used a minimum of $200,000 for natural persons and $1,000,000 for legal entities.
The conditions in the letter are narrow. The investor represents in writing that they are accredited and that the minimum investment is not financed in whole or in part by a third party for the specific purpose of making the investment. The issuer must have no actual knowledge to the contrary. Read it conservatively:
- It is staff guidance, not a rule change. It describes one acceptable approach, not the only one.
- The thresholds and representations in the letter are the reference point. Do not lower them or paraphrase the representations away.
- Red flags still matter. If anything suggests the investor is not accredited, the shortcut does not apply.
- How unfunded commitments, capital calls and entity structures fit is fact-specific. Confirm your structure with securities counsel and keep the file.
Form D and state notice filings
Both paths require a Form D notice filed electronically with the SEC on EDGAR within 15 calendar days after the first sale. The first sale is generally the date the first investor is irrevocably committed, not the date funds arrive. If day 15 falls on a weekend or federal holiday, the deadline moves to the next business day. You will need EDGAR access codes, so apply early.
Amend the Form D annually while the offering continues, and sooner to correct material mistakes or reflect certain changes. A late filing does not by itself destroy the exemption, but it creates problems with states and can affect future offerings.
Rule 506 securities are "covered securities", so states cannot require registration. Most states still require a notice filing, usually a copy of the Form D and a fee, typically within 15 days of the first sale to a resident of that state. Many accept filings through NASAA’s Electronic Filing Depository. Timing and fees vary, so track each state where you have investors.
Before every offering, also run bad-actor checks under Rule 506(d) on the issuer, its managers, large owners and anyone paid to solicit investors.
What this means for your marketing and deal pages
Choose the exemption before the first email goes out. Then make your tools match it:
- 506(b): keep offerings private. No public deal pages, no deal-specific posts, no open webinars. Show deals only to invited investors you already know, and log how each relationship began.
- 506(b): firm-level marketing about your company and track record is a grey area. Keep it general and have counsel review it.
- 506(c): public deal pages are fine, but do not accept a subscription until verification is complete and documented.
- Both: keep target returns consistent between the deck, the deal page and the PPM, with the same risk disclosures.
- Switching: moving a 506(b) offering to 506(c) partway through is generally possible; plan it with your securities attorney. Moving from 506(c) back to 506(b) after you have generally solicited generally is not.