If you’re a founder in Pennsylvania, whether you’re operating out of a tech incubator in Center City, a life sciences lab in King of Prussia, or a creative agency in West Chester, growth usually requires outside capital. But before you accept that $50,000 check from a local angel, you need to understand the three most terrifying letters in the startup world: SEC. Before accepting any checks, it helps to speak with startup securities attorneys.

In the eyes of the Securities and Exchange Commission, not all money is created equal. To protect the public, federal law generally restricts private companies from selling securities, which include shares in your LLC or corporation, to anyone who is not accredited.

In 2026, the rules governing vetting of these investors became more precise. If you fail to verify your investors’ status, you could face rescission issues, meaning you might be legally forced to pay back every cent of investment plus interest, right when you can least afford it.

What Is an Accredited Investor in 2026?

The Accredited Investor definition is designed to identify people who have sufficient financial sophistication or a sufficient financial cushion to handle the risk of a startup failing. As of 2026, the primary ways an individual qualifies are:

The Income Test

An annual income exceeding $200,000, or $300,000 with a spouse or partner, in each of the two most recent years, with a reasonable expectation of reaching the same level this year.

The Net Worth Test

A net worth exceeding $1 million, either alone or with a spouse or partner.

Crucial Rule: You cannot include the value of your primary residence in this calculation.

The Professional Test

Individuals who hold certain professional certifications in good standing, such as the Series 7, Series 65, or Series 82 licenses.

Rule 506(b) vs. Rule 506(c): Choosing Your Path

Under Regulation D, there are two primary safe harbors that Pennsylvania startups use to raise money. Choosing the wrong one is the most common legal pitfall for founders.

Rule 506(b): The Quiet Round

This is the traditional way to raise money from friends and family.

The Catch: You cannot engage in general solicitation. This means no LinkedIn posts that you are raising a round, no public advertisements, and no open-to-the-public demo days.

Vetting: You can generally rely on self-certification, meaning a questionnaire where the investor checks a box, if you have a preexisting substantive relationship with them.

Rule 506(c): The Loud Round

This is the modern standard for startups using platforms or public pitches.

The Benefit: You can publicly advertise your raise on social media and at public events.

The Catch: You have a heightened legal duty to verify that 100% of your investors are accredited investors. Simple: check-the-box questionnaires are not legally sufficient for 506(c).

How to Legally Vet Your Investors

If you are raising capital under Rule 506(c), or if you want to be extra cautious under Rule 506(b), you must take reasonable steps to verify accreditation. Here is how we recommend our SEPA clients handle it:

Review Financial Documentation

You or your lawyer can review the investor’s tax returns, W-2s, or brokerage statements—warning: Most high-net-worth individuals do not like sharing these directly with founders.

The Third Party Letter

This is the gold standard. You can accept a written confirmation from the investor’s CPA, attorney, or registered investment advisor stating that they have verified the investor’s status within the last 90 days.

Verification Services

Use a third-party platform such as VerifyInvestor or InvestReady. They handle document collection, protect the investor’s privacy, and provide you with a legal shield to present to regulators if questions arise.

The Pennsylvania Blue Sky Warning

Even if you follow federal SEC rules carefully, you still must deal with the Pennsylvania Department of Banking and Securities.

Under Blue Sky laws, even though the federal government preempts state registration for Regulation D offerings, you are still required to file Form D in Pennsylvania and pay a filing fee, which is currently $525. This must be done within 15 days of the first sale of a security in the state, and there are no extensions. Failing to file this notice will not automatically lead to criminal trouble, but it will create serious due diligence red flags when you try to raise a Series A round or sell your company.

Summary Comparison

Rule 506(b)

Public advertising is prohibited. You may include up to 35 non-accredited investors, along with unlimited accredited investors. The vetting level is usually based on self-certification and an existing relationship. Audit risk is moderate.

Rule 506(c)

Public advertising is allowed. All investors must be accredited. The vetting level requires mandatory third-party-style verification. Audit risk is higher if proper vetting steps are missing.

Final Thoughts: Protect Your Cap Table

Taking money from unaccredited investors without following the proper exemption is like building a house on a cracked foundation. It may look fine at first, but when venture capital lawyers review your company for the next round, they may find serious structural issues.

Before you accept that first wire transfer, make sure your Subscription Agreement includes proper accredited investor representations and that your Form D filing deadlines are clearly calendared.

Speak With a Startup Securities Attorney

Raising capital is exciting, but securities compliance mistakes can follow your company for years. If you are planning a friends-and-family round or preparing for a broader raise, it is smart to get legal guidance early. Contact us online to connect with Nathan Wenk and ensure your