Syndication to nonaccredited or sophisticated investors

[Steven Kleppin]

Hello. I want to start to syndicate and I have several family and friends who are interested in investing in me. I also hear many times on the podcasts that people go to friends and family to raise money on their early investments. But it seems like those friends and family would have to be accredited or "sophisticated" investors to not violate SEC laws. Is there something that I'm missing? I know I could do an LLC with them being limited partners, but was specifically looking at syndication because I think I'd need a larger number of investors than what's generally accepted as LPs in an LLC.

Thanks for any help!

[Amy Wan]

They only have to be all accredited investors if you're doing a 506(c), which you wont want to do at this early stage anyway. You would more likely be using a 506b, under which you can take up to 35 non-accredited investors, so long as 1) you already know them (i.e. family, friends, people in your network), and 2) they are "sophisticated" in that they understand the risks of the investment and that they could lose all their money.

Happy to answer any other questions you have. Syndication (or at least the legal process) is all I do ;)