When deciding between a Michigan-only Tier 1 raise and a National Tier 2 raise, the “break-even” point usually comes down to whether the cost of an audit (Tier 2) is cheaper than the cost of multi-state legal filings (Tier 1).
Here is the projected cost-benefit breakdown for 2026.
Scenario 1: Michigan-Only Raise ($5M)
Tier 1 Offering
This is the “low-cost entry” model. You skip the audit but lose the ability to market easily outside of Michigan.
- CPA Costs ($0 – $2,500): No SEC audit required. You may only pay a CPA for basic financial compilation.
- Michigan Filing Fee ($500): Based on the 0.1% rate for a $500k target from MI residents (or $1,250 max if you target the full $5M in-state).
- Legal Fees ($15k – $25k): Lower because you are only dealing with one state’s “Blue Sky” regulator.
- Transfer Agent Setup ($1,500): Standard digital cap table setup.
- Estimated Total Upfront: $17,000 – $30,000
- CPA Audit ($15k – $35k): Required. You need two years of audited financials. (Price varies by company complexity).
- State Filing Fees ($5k – $12k): Total for “Notice Filings” across the US. Since Tier 2 “preempts” state law, you don’t wait for their approval; you just pay the fee.
- Legal Fees ($35k – $60k): Higher due to the complex SEC Form 1-A filing and ongoing compliance.
- Transfer Agent Setup ($2,500): Same as Tier 1, but monthly fees will rise as your shareholder count grows.
- Estimated Total Upfront: $60,000 – $110,000
| Expense Category | Tier 1 (MI Only) | Tier 2 (National) |
|---|---|---|
| Audit Required? | No | Yes |
| Audit Cost | ~$0 | $15,000 – $35,000 |
| Legal (Initial) | $15,000+ | $35,000+ |
| State Fees | $1,250 (Max) | $10,000 (Avg for 50 states) |
| Ongoing SEC Reporting | None (Save $10k/yr) | Required (Est. $15k/yr) |
| Marketing Reach | Michigan Only | All 50 States |
The “Break-Even” Verdict
- Go Tier 1 if: You have a strong, local Michigan following (e.g., a real estate project or a local craft brand) and $5M is plenty. You save roughly $40,000+ in upfront costs.
- Go Tier 2 if: You need more than $10M or your audience is spread across the US. The $40k extra you spend on an audit is much cheaper than trying to manually register a Tier 1 in all 50 states, which could cost over $100k in legal hours.
Would you like me to help you find a Michigan-based CPA who specializes in SEC/Regulation A audits to get a firm quote?