To protect your corporation and ensure you are following SEC Regulation D guidelines, you should have every potential investor (even your brother or best friend) fill out a Suitability and Accredited Investor Questionnaire.
Below is a structured draft you can use as a template. This document serves as your “paper trail” to prove you performed due diligence before issuing shares.
INVESTOR SUITABILITY QUESTIONNAIRE
Company Name: [Insert Your Corporation Name]
Offering: Common Stock Purchase
Section 1: Investor Identity
- Full Name: ________________________________________________
- Residential Address: ________________________________________
- Relationship to Founder/Company: ___________________________ (Example: Family, Long-time Friend, Business Associate) * Occupation: ________________________________________________
Section 2: Accredited Investor Status
The SEC defines an “Accredited Investor” as someone who meets specific wealth thresholds. Check any that apply:
- [ ] Income: My individual income exceeded $200,000 (or $300,000 with a spouse) in each of the last two years, and I expect the same this year.
- [ ] Net Worth: My net worth (or joint net worth with my spouse) exceeds $1,000,000, excluding the value of my primary residence.
- [ ] Entity: I am signing on behalf of an entity with total assets exceeding $5,000,000.
- [ ] None of the above: I am a Non-Accredited Investor.
Section 3: Investment Experience & Risk
- Experience: Do you have experience investing in private, unlisted companies? [ ] Yes [ ] No
- Risk Tolerance: Do you understand that this is a highly illiquid investment and you could lose 100% of your capital? [ ] Yes [ ] No
- Time Horizon: Do you understand that there is no public market for these shares and you may be required to hold them indefinitely? [ ] Yes [ ] No
Section 4: Certification
”I hereby certify that the information provided above is true and correct. I am purchasing these shares for my own account and not with a view toward distribution or resale.”
Signature: __________________________ Date: _______________
Why this document matters
- The 35-Person Rule: If you are using Rule 506(b), you can have unlimited accredited investors but only 35 non-accredited ones. This questionnaire helps you keep count.
- The “Bad Actor” Check: You are also verifying that your friends/family aren’t “bad actors” (people with certain criminal convictions) which could disqualify your entire company from raising money.
- Form D: Even for a small “family and friends” round, you generally must file Form D with the SEC within 15 days of the first sale to claim your legal exemption.
Would you like me to draft a simple “Subscription Agreement” that would follow this questionnaire to finalize a stock sale?