506(c) vs 506(b): Which One Lets You Advertise Your Raise?

The short answer

Rule 506(b) prohibits general solicitation — you can only raise from investors you already have a substantive relationship with, but they can self-certify as accredited (and up to 35 sophisticated non-accredited investors may participate). Rule 506(c) permits general solicitation — you can advertise the offering publicly to anyone — but every investor must be accredited, and you must take reasonable steps to verify it.

What 'general solicitation' actually covers

General solicitation is broader than most sponsors assume. Running Facebook or Instagram ads about your offering, mentioning the raise on a podcast, posting deal terms on LinkedIn, pitching at a meetup full of strangers, a public webinar that discusses the offering — all of it counts. Under 506(b), any of these can blow the exemption for the entire offering. Under 506(c), all of them are legal.

What 506(c) costs you: verification

The price of advertising rights is that self-certification is no longer enough. "Reasonable steps to verify" typically means reviewing tax returns or W-2s, bank/brokerage statements, or a written confirmation from the investor's CPA, attorney, or a third-party verification service (most sponsors use one — typical cost is roughly $50–$100 per investor and the better services turn it around in a day or two).

In practice, verification is a funnel step, not a deal-breaker: investors serious enough to wire six figures rarely balk at a five-minute verification flow, especially when it's positioned as a compliance feature that protects them too.

How sponsors actually choose

• Choose 506(b) when your existing network can realistically fund the whole raise, you have non-accredited investors you must include (family, early supporters), and you want zero verification friction.
• Choose 506(c) when your network can't fund the deal, you're raising on a deadline, you're building a repeatable capital pipeline across multiple deals, or you want content and ads doing the prospecting for you.
• A common path: first deal 506(b) with friends and family; every deal after that 506(c), because the network is tapped and growth has to come from strangers.

One more wrinkle: you can't start an offering as 506(b) and casually flip it to 506(c) mid-raise. Converting requires care (and counsel) — generally you must be able to show the offering complies with 506(c) requirements from the conversion forward, including verification of all investors who close after the switch. Decide before you launch.

What stays the same under both rules

Choosing an exemption changes how you market — it doesn't change the rest of your obligations. Under both 506(b) and 506(c):

• Form D must be filed with the SEC within 15 days of the first sale, and most states require blue-sky notice filings (with fees) where your investors live.
• Anti-fraud rules always apply. An exemption from registration is not an exemption from telling the truth — misstatements or omissions in your deck, webinar, or PPM carry liability under either rule.
• The accredited investor definition is identical: commonly $200k income ($300k joint) in each of the last two years, or $1M net worth excluding the primary residence, plus certain professional licenses and entities.
• Offering documents are still expected. A PPM, operating agreement, and subscription agreement are standard for serious raises under either exemption — investors' counsel will ask for them.
• There is no cap on the raise. Rule 506 offerings (b or c) have no dollar limit, which is why they dominate private real estate.

In other words: the compliance workload is roughly the same either way. The only thing 506(c) adds is verification — and the only thing 506(b) saves you is that step, at the price of your entire public marketing toolkit.

The mistake that kills 506(b) exemptions

The most common compliance failure we see isn't paperwork — it's a 506(b) sponsor marketing like a 506(c) sponsor. A "soft" public post about the deal, an ad that "just builds the brand" but names the offering, a webinar recording posted publicly. If a regulator or a litigious investor can frame it as general solicitation, the exemption for the entire raise is at risk, which can mean rescission — offering every investor their money back.

If your growth plan involves any public marketing of the offering, the honest answer is usually: structure as 506(c) and do it legally, rather than doing 506(b) and hoping nobody notices.