In Michigan, Tier 1 offerings are regulated by the Department of Licensing and Regulatory Affairs (LARA), specifically the Corporations, Securities & Commercial Licensing Bureau.
If you are filing a Tier 1 in Michigan, you must navigate their specific “Blue Sky” requirements, which are more hands-on than the federal process.
1. Registration Method: “Qualification”
Since Tier 1 does not “preempt” state law, you must register in Michigan by Qualification.
- Coordinated Review: Michigan participates in the NASAA Coordinated Review program. It is highly recommended to use this. You file with the lead state, and Michigan will review the “comment letter” generated by that lead state rather than starting their own separate investigation from scratch.
2. State Filing Fees
Michigan’s fees are based on the amount of money you intend to raise specifically from Michigan residents:
- The Rate: 1/10th of 1% (0.001) of the total dollar amount of securities to be offered in Michigan.
- The Minimum: $100.
- The Maximum: $1,250.
Example: If you are offering $500,000 worth of shares to Michigan residents, your fee would be $500.
3. Required Documents for Michigan
When you submit your application to LARA, you typically need:
- Form 1-A: The same Offering Circular you filed with the SEC.
- Consent to Service of Process (Form U-2): This allows Michigan regulators to receive legal papers on your behalf if you are sued in the state.
- The Fee: A check or electronic payment made out to the “State of Michigan.”
4. Michigan “Merit” Standards
Michigan is generally considered a Disclosure state, but they still have the authority to review the “substantive fairness” of the deal. They look for:
- Promoter Equity: If the founders have a massive amount of “cheap stock” while asking the public for a high price, Michigan may ask for a “lock-up” agreement (preventing founders from selling their shares for a certain period).
- Escrow: If you don’t have a minimum “break-point” (e.g., “We won’t take any money unless we raise at least $100k”), Michigan may require you to put funds in an escrow account until that minimum is met.
5. Using a CPA in Michigan
For Tier 1 in Michigan:
- No Audit Required: Michigan follows the SEC’s Tier 1 lead. You do not strictly need audited financials unless you already have them.
- Review Level: However, the state examiner has the right to ask for “reviewed” financials if they feel the company’s current financial state is too opaque to protect Michigan investors.
Summary Table for Michigan Tier 1
| Requirement | Detail |
|---|---|
| Filing Fee | 0.1% of Michigan offering (Min $100 / Max $1,250) |
| Review Style | Disclosure-focused (Coordinated Review available) |
| Form | Form 1-A + Form U-2 |
| Audit | Usually not required for Tier 1 |
| Agent Reg | Officers selling shares may need to register as “Agents” |