What Documents Does a Compliant Friends-and-Family Round Need, and What Do They Cost?

A compliant friends-and-family round under Rule 506(b) usually needs: a term sheet; the investment agreement itself (a subscription agreement, plus the SAFE, note or share terms); an investor questionnaire confirming accredited status; written risk factors or a private placement memorandum; board or member approval and an updated cap table or operating agreement; bad-actor certifications from the company's leaders; a Form D filed with the SEC within 15 days of the first sale; and state notice filings where investors live. Form D is free to file with the SEC; state fees vary by state. If any investor is not accredited, Rule 506(b) also requires specified disclosure, including financial statements, before the sale.

By Joel Arberman, founder of Prepared to Raise · 17 companies taken public, 30+ private placements prepared · Reviewed October 21, 2026

The checklist

  1. Term sheet. One or two pages: the amount, the security, the price or cap, minimum investment, investor rights and the closing timeline. Everyone in the round sees the same one.
  2. Subscription agreement. The contract in which each investor agrees to buy, makes representations about their status and acknowledges the risks.
  3. The security's own terms. The SAFE, the convertible note, the stock purchase terms, or the amended LLC operating agreement. Choosing the security.
  4. Investor questionnaire. Establishes whether each investor is accredited, and for non-accredited investors whether they are sophisticated.
  5. Risk factors or a PPM. Written disclosure of what could go wrong, specific to your business. Required in full if any investor is non-accredited. When you need a full PPM.
  6. Company approvals. A board or member consent authorizing the offering and the issuance.
  7. Bad-actor certifications. Rule 506 is unavailable if the company's directors, officers, large shareholders or certain others have specified disqualifying events. Each should confirm in writing.
  8. Updated cap table or member schedule after closing.
  9. Form D, filed with the SEC within 15 days of the first sale. How Form D works.
  10. State notice filings where investors live. How blue-sky notices work.

What each costs

  • Form D: free to file with the SEC.
  • State notice filings: most states charge a fee, which varies by state and sometimes by offering size.
  • Legal documents: depends on counsel and complexity. Get a fixed quote in writing, and ask whether it covers the term sheet, subscription agreement, questionnaire, risk factors and filings, or only some of them.
  • Through Prepared to Raise: the Network Raise package is a fixed $15,000 for raises up to $1 million. It includes the strategy, the investor deck, the executive summary, a lawyer-reviewed term sheet, subscription agreement, investor questionnaire and risk factors, the Form D, a data room and 90 days of support. State filing fees are not included. A full PPM is a $5,000 add-on.

If any investor is not accredited

Rule 506(b) allows up to 35 non-accredited investors in an offering, but each must be financially sophisticated, alone or with a representative, and must receive specified disclosure, including financial statements, a reasonable time before buying. In practice that means a full PPM and more preparation. Many founders keep friends-and-family rounds to accredited investors for this reason, or use Regulation Crowdfunding to include everyone.

After closing

  • Issue the shares, notes or units and update the records.
  • Send each investor countersigned documents.
  • Calendar Form D amendments and any state renewals.
  • Set an investor-update rhythm, quarterly at minimum.
  • For LLCs, deliver K-1s each year.

Common mistakes

  • A handshake and a Venmo. Money taken without documents is still a securities sale, just an undocumented one.
  • Different terms for different relatives. Everyone in a round should sign the same documents.
  • Skipping the questionnaire. Without it, you can't show who was accredited.
  • Forgetting the filings, or filing only in your home state.
  • Generic risk factors copied from a template.

Related questions

Can I use templates?

Templates are a starting point. They don't know your business, your risks or your state filings, and they don't tell you whether your offer is investable. What a lawyer does and doesn't do.

Do I need all this for $50,000 from one relative?

Yes, scaled to the size. One investor still needs an agreement, a questionnaire, risk disclosure, approval, and usually a Form D and a state notice.

How long does it take?

About four weeks for our Network Raise package, from the first strategy session to documents ready to sign.

Where to start

Our Network Raise package produces the full document set at a fixed fee. Not sure what you need? Start with a Readiness Assessment ($1,500, credited within 60 days).

Prepared to Raise is a service of Meraki Partners, LLC. This article is general information, not legal, tax or investment advice, and not an offer to sell or a solicitation to buy any security. Meraki Partners is not a broker-dealer, funding portal, investment adviser or law firm. Figures are as of the review date above.