Under Regulation A, there are two offering tiers – each with a different limit on maximum dollars raised as well as different offering qualification requirements. Are you considering using Reg A to raise capital and need help deciding between Tier 1 and Tier 2? Don’t hesitate to contact us and we would be happy to guide you through the selection process to find the best tier to meet your needs. Additionally, we’ve created this brief summary table to highlight some of the core differences between the two tiers:

Tier 1 Reg A Offering Tier 2 Reg A Offering
Maximum Offering Size $20M $75M
Maximum Offering Duration 12 months 12 months
Accepted Investor Types Accredited, Non-Accredited, Institutions Accredited, Non-Accredited, Institutions
Accepted Investor Locations State By State (Best for offerings that will appeal to investors in specific states or regions) Nationwide (Best for offerings that will appeal to investors nationwide)
Offering Qualification Timeline Can be Slower (multiple points of qualification by each individual state) Can be Faster (single point of qualification by the SEC)
Upfront Financial Audit Not required by SEC (though some individual states will require) Required – US-GAAP level that goes back up to two years
Post Offering Reporting Requirements Less Involved (Form 1-SA, Form 1-U) More Involved (Form 1-K, Form 1-SA, Form 1-U, Form 1-Z)
Broker-Dealer Requirements Optional (but recommended) Optional (but recommended)

Maximum Offering Size

  • Tier 1: $20M
  • Tier 2: $75M

Maximum Offering Duration

  • Tier 1: 12 months
  • Tier 2: 12 months

Accepted Investor Types

  • Tier 1: Accredited, Non-Accredited, Institutions
  • Tier 2: Accredited, Non-Accredited, Institutions

Accepted Investor Locations

  • Tier 1: State By State (Best for offerings that will appeal to investors in specific states or regions)
  • Tier 2: Nationwide (Best for offerings that will appeal to investors nationwide)

Offering Qualification Timeline

  • Tier 1: Can be Slower (multiple points of qualification by each individual state)
  • Tier 2: Can be Faster (single point of qualification by the SEC)

Upfront Financial Audit

  • Tier 1: Not required by SEC (though some individual states will require)
  • Tier 2: Required – US-GAAP level that goes back up to two years

Post Offering Reporting Requirements

  • Tier 1: Less Involved (Form 1-SA, Form 1-U)
  • Tier 2: More Involved (Form 1-K, Form 1-SA, Form 1-U, Form 1-Z)

Broker-Dealer Requirements

  • Tier 1: Optional (but recommended)
  • Tier 2: Optional (but recommended)

Maximum Offering Size

The maximum offering size of a Tier 1 vs Tier 2 Reg A offering is as follows:

  • Tier 1 allows issuers to raise up to $20 million
  • Tier 2 allows issuers to raise up to $75 million

Maximum Offering Duration

Both Tier 1 and Tier 2 offerings have a maximum offering duration of 12 months.

Be aware though that you are not limited to a single Reg A offering. We work with many issuers who have completed multiple Reg A offerings; many companies electing to use Reg A as an ongoing format for raising capital. In fact, the efficiency of your raise will improve with each Reg A offering and your cost of capital should go down; this is primarily related to the growth of your existing investor base (think repeat investments) as well as your email prospect list. After each successful Reg A offering, the issuer must submit for a new SEC qualification.

Accepted Investor Types

In both tiers, the issuer may accept investments from the following types of investors in the United States:

Accepted Investor Locations

With Tier 1 offerings – the issuer must choose which states they want to file in and then satisfy the individual requirements of each state. Typically, this Tier is best for issuers whose offering will appear to investors in a specific state or range of states. Tier 1 issuers can not accept investments outside of the states they choose to file in.

With Tier 2 offerings, issuers are typically accepting investors from all states. Tier two is a more common option and for companies whose offering will appeal to investors nationwide.

Offering Qualification Timeline

This can vary significantly for both Tiers of offerings, but I will say that Tier 2 offerings can typically qualify faster than Tier 1 offerings. The primary distinction here is that Tier 2 offerings have a single point of qualification (which is the SEC), whereas Tier 1 offerings must meet state-level requirements which often have a higher degree of unpredictability.

This statement typically holds true when comparing Tier 2 offerings to Tier 1 offerings that are being filed in multiple states. If we’re looking at a Tier 1 offering that only being filed in a single state, for example, it’s possible that could be qualified more quickly than a Tier 2; but this is dependent on the individual state.

For a full list of filing requirements by state, you can visit the NASAA website:

Upfront Financial Audit

With Tier 1, no upfront financial audit is required by the SEC, but it is important to note that many individual states will require this. So if an issuer is filing a Tier 1 offering in these specific states, they will end up having to complete this audit anyway. We find in many situations, this often makes the upfront financial audit a moot point for issuers as they are having to satisfy this requirement in the case of either Tier 1 or Tier 2.

With Tier 2, a US-GAAP level financial audit is required upfront which goes back up to two years.

Post Offering Reporting Requirements

Once the Reg A offering is completed, the issuer will be required to file the following with the SEC:

For Tier 1 – 

  • Form 1-SA (Semi-Annual Report)
  • Form 1-U (Current Report)

For Tier 2 – 

  • Form 1-K (Annual Audit)
  • Form 1-SA (Semi-Annual Report)
  • Form 1-U (Current Report)
  • Form 1-Z (Exit Report)

Broker-Dealer Requirements

In both Tier 1 and Tier 2, issuers are not required to use a broker-dealer. With that said, a broker-dealer simplifies the process for issuers and provides easier access to specific states that don’t follow the same SEC compliance as the majority of states; often referred to as the “problem states”.

These “problem states” are: Arizona, Florida, Nebraska, North Dakota, Texas, Washington, New York and New Jersey

Using a FINRA registered Broker-Dealer will allow you to raise capital in every state. The typical fee structure is 1% for use of a broker-dealer.

Don’t hesitate to contact us and we’ll connect you with the best broker-dealers in the business.

The Bottom Line

We hope you found this useful and not are equipped with the information you need to choose between a Tier 1 and Tier 2 Reg A offerings.

As you may have gleaned from the above article, Tier 2 offerings are more common and are what the majority of the issuers we work with choose.  It is estimated that over 90% of the capital raised to date via Regulation A was done so via Tier 2. Tier 1 has only accounted for roughly 5-10% of the total capital raised and I would expect that percentage to shrink even further as Regulation A grows in popularity.

As mentioned above, don’t hesitate to contact us and we would be happy to guide you through the selection process to find the best tier to meet your needs!

Published On: April 19th, 2022 / Categories: Equity Crowdfunding, Equity Crowdfunding Legal & Regulatory, Regulation A /

About the Author: Ryan Frank

Ryan Frank
Ryan Frank is the CEO & Founder of Funded which provides end-to-end marketing/advertising solutions for equity crowdfunding and private placement capital raises. Ryan has been in the digital marketing industry for 15 years and brings a wealth of knowledge to the equity crowdfunding/capital raise space.

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