Fact Sheet – Securities Registration

If you form an entity to hold property or operate a business, you may need to file notices with the Securities & Exchange Commission (SEC) and California Department of Business Oversight (DBO) in order to claim exemption from securities registration requirements.

Federal Securities Registration

The offer and sale of stock in a corporation or ownership interests in corporations and limited liability companies are considered “securities” under Section 2(a)(1) and Section 3(a)(3) of the Securities Act of 1933. The interests you issue when you form a small entity for your yacht charter activity should qualify for exemption from registration under Regulation D of the Securities Act, but you should file a Form D Notice with the SEC to claim the exemption.

Regulation D applies to sales of securities not exceeding $5 million, or sales to:

  • No more than 35 purchasers from the issuer in any offering, excluding relatives living in the same residence and accredited investors, which are individuals whose:
    • Net worth (with spouse) exceeds $1 million, not including their primary residence, and
    • Income exceeds $200,000, or joint income with spouse exceeds $300,000.
  • Purchasers have such knowledge and experience in financial and business matters that they are capable of evaluation the merits and risks of the prospective investment.

The issuer should furnish the purchaser with information about its business operations, financial condition, results of operations, risk factors, and management, along with relevant financial statements.

The notice must be filed within 15 days after the first sale of securities.

File the Form D Notice online at: https://www.sec.gov/smallbusiness/exemptofferings/formd or contact us for assistance.

See: https://www.sec.gov/fast-answers/answers-regdhtm.html for more information on the SEC requirements.

California Securities Registration

There are four requirements to claim the Limited Offering Exemption Notice pursuant to Corporations Code section 25102(f).

  1. sales of securities are limited to no more than 35 unaccredited investors, including those located outside California,
  2. each investor is required to have a pre-existing business or personal relationship with the issuer of the securities, or, in the alternative, can be demonstrated to be a sophisticated investor,
  3. advertising of the securities is prohibited, and
  4. at the time of purchase, the investor must not intend to resell the securities.

California Corporations Law requires you to file a notice of the exemption of the issuance of your business interests from registration. This notice is also available for filing online. See http://www.dbo.ca.gov/Licensees/Corporate_Securities_Law/faqs.asp or let us know and we can assist with the filing.

Filing fees for this filing are payable with the electronic filing:

Values of Securities Proposed to be Sold Filing Fee
$25,000 or less $25
$25,001 to $100,000 $35
$100,001 to $500,000 $50
$500,001 to $1,000,000 $150
Over $1,000,000 $300

Tarlson & Associates is an independent public accounting firm which provides a wide range of services to individuals, businesses, estates, trusts, and nonprofits worldwide. We are not attorneys and nothing in this Fact Sheet should be construed as legal advice. Rather, it represents our considered opinion as accountants with considerable business experience over many years of professional practice. Feel free to contact us for additional information concerning these matters.