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Financials formats

  • Business
  • 5 min read

Whenever you share your business’ financials, the question arises as to what format they are and what format is required for the occasion.

Banking Requirements

Most business owners are familiar with the requirements commercial banks require, which is set of financial statements in a package covering the following three years – we’ll call that a commercial banking package:

  • Profit & Loss Statement
  • Balance Sheet Statement
  • Accounts Receivable Statement
  • Accounts Payable Statement
  • IRS tax form (1065 for partnerships or 1120 for corporations)
  • Bank statements for last 3 months

Taken together, these financial statements allow the underwriting analyst or committee determine the ability of the applicant to repay any debts taken on by the business. Secondarily, it allows the analyst to look for fraud or mistakes in the financial statements by tying the financials statements, banking statements, and tax forms together (many times this is done through spreadsheet analysis).  Commercial banks almost always require a personal guarantee from all 20% or more owners, which would then make the following required as well:

  • Personal Financial Statement (PFS)
  • IRS tax forms 1120 for last 3 years

Reg CF and Reg A+

Whenever you’re in the process of fundraising for your business, the golden rule is action – whoever has the gold determines what format your financials need to be in.  For businesses engaging in initial fundraising, we recommend doing so under Regulation Crowdfunding (sometimes referred to as “Reg CF“) – this lets the business raise up to $1,070,000 with minimal regulation by filing a U.S. Securities & Exchange Commission (‘SEC’) Form C (this form is filed but not reviewed by the SEC) with the following financial formats:

  • up to $107,000 – financials can be in any format with the principal officer’s signature (GAAP format is recommended but not required);
  • above $107,000 to $535,000 – financials must be reviewed by an independent CPA;
  • above $535,000 to $1,070,000 – reviewed if first time using Reg CF otherwise audited by an independent CPA.

For businesses that are most sophisticated and would like to raise up to $75,000,000, Regulation A+ (referred to as “Reg A+“) provides the ability to not only raise the money using the benefit of the JOBS Act but also being publicly traded if they file a Form 211 with FINRA to get a trading symbol.  The business must file an SEC Form 1-A, which is reviewed and commented on by the SEC before it is effective.  This form has many specific financial format requirements:

Part II of Form 1-A requires issuers to provide financial statements that comply with the requirements of Part F/S. Part F/S requires issuers in both Tier 1 and Tier 2 offerings to file balance sheets and related financial statements for the two previous fiscal year ends (or for such shorter time that they have been in existence). For Tier 1 offerings, issuers are not required to provide audited financial statements unless the issuer has already prepared them for other purposes. Issuers in Tier 2 offerings are required to include financial statements in their offering circulars that are audited in accordance with either the auditing standards of the American Institute of Certified Public Accountants (AICPA) (referred to as U.S. Generally Accepted Auditing Standards or GAAS) or the standards of the Public Company Accounting Oversight Board (PCAOB). Part F/S requires issuers in both Tier 1 and Tier 2 offerings to include financial statements in Form 1-A that are dated not more than nine months before the date of non-public submission, filing, or qualification, with the most recent annual or interim balance sheet not older than nine months. If interim financial statements are required, they must cover a period of at least six months.

SEC Form 1-A

Even though less complex formats may be allowed, we recommend that PCAOB formatted financials be used because FINRA will not allow you to get a symbol without the PCAOB audited financials being filed with the SEC.

Also see Start Engine’s help on Small OPO.

Financial Formats for lay people

For simplicity’s sake, we have included a list of increasing complexity and cost to create:

  1. Management financial package (prepared by a bookkeeper or clerk)
  2. CPA prepared
  3. CPA reviewed, sometimes referred to as “AICPA”
  4. CPA audited, sometimes referred to as “audited”
  5. PCAOB audited

Many times, you’ll hear Generally Accepted Accounting Principles (GAAP) being used as well:

are a set of rules that encompass the details, complexities, and legalities of business and corporate accounting. The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices.


About DSV Consulting LLC

DSV Consulting LLC is a management consulting and merchant banking organization helping emerging businesses structure and achieve growth. With over 45 years of experience with emerging businesses up to $10M revenue, our professionals have experience in diverse industries – custom software development, training, merchant banking, private equity, maritime, and oil & gas.

Our management consulting is wrapped in a simple format – checklist based, focused on client specifics, and built to provide long term value to our clients. Our merchant banking services combines our management consulting concepts with our extensive network of professionals spanning accounting (CPA), auditing, broker dealers, litigators, securities lawyers, among others.

For further information, see our services pages: