Can You Raise Only From Investors in Your Own State? Rule 147 and 147A

Yes. Section 3(a)(11) of the Securities Act, with its Rule 147 safe harbor and the separate Rule 147A exemption, lets a company that is resident and doing business in one state sell securities only to residents of that state, with no federal limit on size or number of investors. For an apartment deal, an LLC whose managers run it from that state and whose building is in that state usually meets the business tests. The catch is that the federal exemption does not preempt state law, so the offering must still be registered or exempt in that state, and buyers cannot resell to out-of-state people for six months.

This guide covers the two rules, how a real estate deal meets them, who counts as a resident and how the path compares with Rule 506. Rules are as of October 2026.

What is the intrastate offering exemption?

Section 3(a)(11) exempts securities that are part of an issue offered and sold only to persons resident within a single state, where the issuer is a person resident and doing business within that state. The SEC's intrastate page notes that the exemption has no limit on offering size or number of purchasers, and that if even one out-of-state person is offered or sold securities, the exemption may be lost.

Rule 147 is a safe harbor under Section 3(a)(11) with objective standards. Rule 147A, adopted in 2016, is a separate exemption that works almost the same way but is more flexible about offers and where the issuer is organized.

How do Rule 147 and Rule 147A differ?

For a sponsor who formed the LLC in Delaware or Wyoming but runs the deal from Ohio, only Rule 147A is available. For a public social media post that out-of-state followers can see, Rule 147A's offer rule is the one that fits.

How does a real estate deal meet the "doing business" test?

The issuer's principal place of business must be in the state, meaning where its officers, partners or managers primarily direct, control and coordinate its activities. It must also meet at least one of these tests in Rule 147A(c)(2) (Rule 147 has the same list):

1. At least 80% of consolidated gross revenues come from operating a business or real property located in the state.
2. At least 80% of consolidated assets are located in the state.
3. At least 80% of the net proceeds are intended for and used in a business or real property in the state, including the purchase of real property located there.
4. A majority of employees are based in the state.

A new LLC that buys one building in the state usually fits the proceeds test, and once it owns the building, the asset test. A building across a state line fails both.

Who counts as an in-state resident?

• A person: the state where they have their principal residence at the time of sale.
• A company, partnership, LLC or trust: the state where it has its principal place of business. A trust that is not a separate legal entity is resident where its trustees are.
• A vehicle formed to buy into this deal: resident only if every beneficial owner is resident in the state.

Each purchaser must give a written representation of residence. Rule 147A also warns that a written representation alone is not enough for a reasonable belief that a purchaser is in-state, so check something more, such as an ID or a utility bill.

What protections against out-of-state sales are required?

• A legend on the document showing the security, saying resales for six months may go only to residents of the state.
• Stop-transfer instructions, or a notation in the issuer's own records if it keeps them.
• A written residence representation from each purchaser.
• A prominent disclosure to each offeree and purchaser that sales go only to residents and that resales are limited for six months.

Does state law still apply?

Yes, and it decides most of the practical work. Section 18 of the Securities Act excludes intrastate offerings under Section 3(a)(11) from the "covered securities" that states cannot regulate, and the SEC's page says the company must comply with state securities laws. You will need to register the offering in your state or fit a state exemption, which may come with its own investor limits, disclosure document and filing fee. Some states have exemptions designed for intrastate raises. Ask your state securities regulator and your attorney which one fits.

How does an intrastate raise compare with Rule 506?

Rule 506 lets investors live anywhere in the US, but limits who can buy. See 506(b) vs 506(c) and the accredited investor definition.

A worked example (made up)

An LLC formed in Ohio, managed from Columbus, contracts to buy a 16-unit building in Columbus for $2,000,000 and needs $650,000 of equity. The facts are invented.

• All $650,000 of the proceeds go toward the Ohio building, so the 80% proceeds test is met, and the LLC's principal place of business is in Ohio.
• 18 Ohio residents commit $650,000. A follower who lives in Michigan wants to invest $25,000. Under Rule 147 or 147A the sponsor must say no: one out-of-state sale can cost the exemption.
• The sponsor still needs an Ohio registration or Ohio exemption before selling. If many interested investors live in other states, Rule 506 is the better fit.

How DoorRaise fits in

DoorRaise helps sponsors raise equity for apartment buildings with 5+ units from their friends and followers under Rule 506(b) or 506(c), which allow investors in many states. It prepares the standard offering documents, forms the LLC, files Form D and state notices, and verifies accredited investors for 506(c) deals. Escrow is at Enterprise Bank & Trust, an FDIC-insured bank, and investors fund by wire only. Fees are $1,500 at setup (non-refundable), $5,000 at closing (only if the deal closes) and $3,500 a year, with no percentage of the raise and no part of the promote. DoorRaise is not a law firm, broker-dealer, investment adviser, funding portal or bank.

Ready to raise? Create your free sponsor page or see pricing.

FAQ

Can I post an intrastate deal on social media?

Under Rule 147A, offers can reach out-of-state people, including through general solicitation, as long as every sale is to an in-state resident. Under Rule 147, offers must go only to in-state residents, which is hard to control online. State law may add its own rules on advertising.

What happens if I accidentally sell to someone out of state?

The SEC says the exemption may be lost, and without another exemption the offering would violate the Securities Act. Talk to your attorney right away. This is why residence checks matter.

Can I do a second intrastate raise in another state?

Not right away. Both rules bar a new intrastate offering in a different state until six months after the last sale in the earlier one.

Do I file Form D for an intrastate offering?

Rule 503's Form D duty covers Rule 504 and 506 offerings, not intrastate offerings. Your state may require its own filing. See Form D filing for the Rule 506 side.

Next step: read blue sky notice filings to see how Rule 506 handles investors in many states.

Sources

• 15 U.S.C. 77c, including Section 3(a)(11)
• 17 CFR 230.147
• 17 CFR 230.147A
• SEC: Intrastate offerings
• 15 U.S.C. 77r, Section 18 of the Securities Act
• 17 CFR 230.503

This article is general information, not legal, tax or investment advice. Talk to a securities attorney about your deal. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.