The most useful way to compare Rule 506(b) and Rule 506(c) is to start with your fundraising behavior. Who will hear about the offering? How will they hear about it? Who must be able to invest?
Both exemptions permit an unlimited offering amount. Their differences become consequential when you plan outreach and investor admission.
The differences that shape your offering
The current Rule 506 establishes the following framework. Purchaser counting and accredited investor definitions also appear in Rule 501.
| Decision | Rule 506(b) | Rule 506(c) |
|---|---|---|
| General solicitation | Prohibited | Permitted |
| Accredited purchasers | Unlimited number | All purchasers must be accredited |
| Non-accredited purchasers | Up to 35 in any 90-calendar-day period, with sophistication requirements | Not permitted |
| Accreditation process | Reasonable belief that the purchaser qualifies | Reasonable steps to verify accredited status |
| Specified non-accredited disclosure | Required when non-accredited purchasers participate | No non-accredited purchasers |
| Federal offering dollar cap | None | None |
The two routes share other obligations, including Form D, possible state notices and fees, restricted securities, and bad actor provisions. A difference in marketing permission does not remove these responsibilities.
Choose the audience before choosing the campaign
For 506(b), evaluate how each prospective investor enters the process. Pre-existing substantive relationships are one recognized way to establish the absence of general solicitation. They are not the exclusive method, and an email contact alone does not establish the necessary relationship. SEC staff interpretations, Questions 256.26 through 256.31, explain the distinction.
For 506(c), you can consider public offering pages and broader advertising. Yet a large customer list is useful only to the extent that eligible investors are interested and complete verification. Estimate the likely eligible audience before allocating advertising spend.
The SEC’s general solicitation guidance describes the analysis as fact specific. Review social posts, interviews, events, agency campaigns, and founder communications as part of the offering plan.
A password is not an exemption strategy
A login can control access to documents. It does not determine whether the issuer used general solicitation to attract the people receiving access.
For example, a public advertisement inviting everyone to join a supposedly private deal does not become a compliant 506(b) solicitation merely because the final investment page requires a password. The communications and relationships still need analysis. SEC staff also explains that a checkbox alone does not establish a substantive relationship with a prospective investor in Question 256.31.
Apply that distinction when selecting software. Access controls support your process. They cannot establish the legal basis for your outreach.
Non-accredited participation changes the work
If you intend to admit non-accredited purchasers under 506(b), plan their participation at the start. They must satisfy the sophistication standard, and the issuer must provide the required information, including financial statements, a reasonable time before the sale. The SEC’s 506(b) guide outlines these requirements.
Do not describe this option as a general friends-and-family allowance. Friendship does not establish sophistication. The 35-purchaser limit is also not a fresh allowance for every closing or monthly campaign.
Under 506(c), a purchaser who cannot qualify as accredited cannot complete the purchase under that exemption. Build the campaign economics around that admission rule.
A hypothetical comparison
A fictional software company has two possible plans. Under the first, it approaches a defined group of established investor contacts without public solicitation. Under the second, it announces the investment opportunity through podcasts and paid advertising.
The first plan may support a 506(b) analysis. The second requires a pathway that allows the proposed public solicitation, such as 506(c), with its purchaser and verification requirements. Neither plan is automatically suitable because the company sells software or because its target is $6 million.
Before changing plans during a raise, ask counsel to evaluate earlier communications, purchasers, and integration rules. Changing a label on a website does not settle those questions.
How Issuance fits
Issuance supports Rule 506(b) and 506(c) offering technology, including investor checkout, electronic signatures, and dashboard visibility into investments. Your team can evaluate the software against the process counsel has defined.
Use a platform demo to discuss investor entry, document delivery, screening information, and responsibilities for unresolved items. Issuance supplies technology. Your company and its professional partners determine eligibility, offering requirements, and the permitted outreach strategy.