November 9, 2026 · 7 min read
Rule 144 vs Rule 147: Key Differences Explained
One SEC rule is for people selling shares they already own. The other is for local companies raising money at home. How each works and who it affects.
- Securities law
Rule 144 vs 147 comes down to who is selling and where. Rule 144 tells a shareholder when they may resell private shares to the public. Rule 147 lets a company raise money from people in its home state without SEC registration. Employees and investors in a company that lists use Rule 144. Local businesses raising money from neighbors use Rule 147.
If you own shares in a startup, Rule 144 is the rule you will meet. Rule 147 matters if a local company in your state offers you shares. Then you must live in that state to buy, and you can only resell to other residents for six months.
6 months
Rule 144 holding period for a company that reports to the SEC, one year if it does not
6 months
Period after a Rule 147 sale when buyers may resell only to residents of the same state
80%
Share of revenue, assets or proceeds tied to the state, one of four tests under Rule 147
No cap
Federal limit on the size of an intrastate offering or the number of buyers
Rule 144 vs Rule 147: What Is the Main Difference?
The table compares the two rules on definition, who uses each, who can buy, legal and tax treatment, risk, liquidity and a typical example.
Rule 144 governs when a holder can sell to the public. Rule 147 governs how a local company can raise money in one state
As of November 2026 · 17 CFR 230.144, 230.147, 230.147A; SEC intrastate offerings page (03.17.2026). US rules.
Put simply, Rule 144 starts with a shareholder who wants out. Rule 147 starts with a company that wants in-state money.
How Rule 144 Works for a Shareholder
Shares you get from a company in a private deal are restricted securities. Any resale needs registration or an exemption. Rule 144 is a safe harbor, a checklist that shows the exemption fits (17 CFR 230.144).
- WaitSix months if the company has reported to the SEC for at least 90 days. One year if it does not report.
- Check the company’s filingsA reporting company must have filed all its required reports for the past 12 months.
- Insiders do moreAn affiliate, someone who controls the company, can sell up to 1% of the shares outstanding every three months. Above 5,000 shares or $50,000, the affiliate files a Form 144.
Rule 144 does not care where you live or where the company is based. It only asks how long you held the shares and whether you are an insider.
How Rule 147 Works for a Local Company
The Securities Act has an exemption for offerings made only inside one state, Section 3(a)(11). Rule 147 spells out how a company meets it (17 CFR 230.147). The SEC rewrote the rule in November 2016.
- Home stateThe company is organized in the state and has its principal place of business there, where its managers run the business.
- Doing business thereIt meets at least one test: 80% of revenue from the state, 80% of assets in it, 80% of the money raised spent there, or most employees based there.
- In-state buyers onlyEvery offer and sale goes to residents, or to people the company reasonably believes are residents. A signed statement from the buyer is not enough on its own.
- Six-month resale limitFor six months after the company’s sale, buyers can resell only to residents of the same state.
The company must also put a printed warning, called a legend, on the certificates. It must tell its transfer agent to stop transfers that break the rule. And it must tell buyers about the limits in writing.
There is no federal cap on the amount raised or the number of buyers. State securities law still applies, so the company usually deals with its state regulator. The SEC warns that under Section 3(a)(11) alone, a sale to even one out-of-state person may cost the exemption (SEC, 2026).
Rule 147 vs Rule 147A: The Version for the Internet Age
In 2016 the SEC added a sister rule, Rule 147A. It keeps the in-state buyers, the four business tests and the six-month resale limit. It changes two things (17 CFR 230.147A).
- Where the company is organizedRule 147A allows a company formed in another state, such as Delaware, if its principal place of business is in the state.
- Who can see the offerRule 147A allows public advertising, including online, that people in other states can see. Sales still go only to residents.
Which Is Better for Investors or Employees?
Neither rule is better. They solve different problems, and most people will only ever deal with one of them.
- Employees with equityRule 144 is the one that matters. After an IPO, it decides when your shares can reach the market, alongside the lock-up. Shares from a startup stock plan also follow Rule 701.
- Investors in startupsRule 144 again, for shares bought under Regulation D or in other private deals.
- Local investorsRule 147 applies when a business in your state offers shares only to residents. Expect a small company, limited disclosure and no easy way to sell.
Tax Treatment Compared
Neither rule changes your taxes. Both are securities rules about who may buy and sell. In the US, a gain on shares held more than one year is a long-term capital gain. A gain on shares held one year or less is short-term (26 U.S.C. 1222).
The waiting periods in both rules are separate from the tax clock. Get advice on your own case.
Rule 144 vs Rule 147 Pros and Cons: A Verdict on Each
Rule 144
- For
- Opens the whole public market. Clear checklist. No limits on where the buyer lives.
- Against
- You wait six months or a year. Insiders face caps and filings. Of little help until the company has a public market.
Verdict: Rule 144 is the standard exit for holders of private shares once a company lists. It costs time. In return, any buyer can take your shares.
Rule 147
- For
- Lets a local company raise money without SEC registration and with no federal size cap. Lets residents invest in businesses they know.
- Against
- Buyers must live in the state. State rules still apply. Resale stays inside the state for six months.
Verdict: Rule 147 suits a business rooted in one state that wants to raise money from its own community. For an investor it means a local, illiquid holding. Read the state filing before you buy.
Rule 144 tells a holder when they can sell to the public. Rule 147 tells a company how to sell to its own state. If you hold startup shares, Rule 144 is your rule.
Rule 144 vs 147: What Each Means for a Shareholder
If you hold shares in a private company, the first question is whether it reports to the SEC. That sets your Rule 144 clock at six months or one year. Until the company lists, a sale usually means a tender offer or a secondary transaction approved by the company.
If you invest through an SPV, the vehicle holds the shares for you. Axevil sets up a separate Delaware SPV for each deal, managed by Axevil Capital, LLC. A round open to investors in many states cannot use Rule 147, because every buyer must live in one state. For the related comparison with institutional resales, see Rule 144 vs Rule 144A.
Common Mistakes
- Treating the two as alternativesRule 144 is for a holder reselling. Rule 147 is for a company raising money. They rarely meet.
- Moving out of state too soonWithin six months of a Rule 147 sale, you can resell only to residents of the company’s state.
- Forgetting state lawRule 147 skips SEC registration. The state regulator still has its say.
- Starting the Rule 144 clock earlyIt starts when you buy and fully pay for the shares. For options, that is usually the exercise date.
The Terms This Page Uses
- Rule 144
- The SEC safe harbor for reselling restricted or insider shares to the public.
- Rule 147
- The SEC safe harbor for a company selling securities only to residents of its own state.
- Rule 147A
- A 2016 version of Rule 147 that allows out-of-state companies and online offers, with in-state sales only.
- Section 3(a)(11)
- The Securities Act exemption for offerings made only within one state.
- Safe harbor
- A set of conditions that, if met, shows a transaction fits an exemption.
- Restricted securities
- Shares acquired from a company in a private deal that cannot be resold freely.
- Affiliate
- A person who controls the company, such as a director, officer or large holder.
- Principal place of business
- Where a company’s officers or managers mainly direct and run its activities.
- Legend
- A printed warning on a share certificate that states the limits on resale.
- Form 144
- The notice an affiliate files before selling more than 5,000 shares or $50,000 in three months.
What People Ask About Rule 144 and Rule 147
No federal limit. The SEC says the intrastate exemption does not cap the size of the offering or the number of buyers. Your state may set its own limits.
No. Sales go only to residents of the company’s state. Under Rule 147A you may see the offer online, but you still cannot buy.
Yes, with limits. For six months after the company’s sale, you can resell only to residents of the same state. You also need to find a buyer yourself.
Yes. If the company does not report to the SEC, the holding period is one year. Most private companies offer no public market, though, so a sale usually goes through the company.
No. Tax depends on your gain and how long you held the shares. More than one year makes it long term under US rules.
Where Every Rule on This Page Comes From
Rules were last checked on November 9, 2026. All rules described are US federal rules. State securities laws add their own conditions to intrastate offerings.
- 01Cornell LII · 17 CFR 230.144Current ruleRule 144: holding periods, current information, affiliate volume cap, Form 144 thresholds
- 02Cornell LII · 17 CFR 230.147Current ruleRule 147: residence, doing-business tests, in-state offers and sales, six-month resale limit, legends
- 03Cornell LII · 17 CFR 230.147ACurrent ruleRule 147A: general solicitation, in-state sales, six-month resale limit
- 04US Securities and Exchange Commission03.17.2026Intrastate offering exemptions: 3(a)(11), Rule 147 and 147A compared, no size cap, state law applies
- 05Cornell LII · 26 U.S.C. 1222Current statuteShort-term and long-term capital gains, the one-year line
This page explains how a market works. It is not investment advice, not a recommendation of any security, strategy or company, and not an offer to sell or a solicitation to buy anything. Private companies may never list or be acquired, positions in them can be illiquid for years, and the entire amount invested can be lost. Figures are accurate as of the dates shown and change. Requirements for investor status, and the tax treatment of a private holding, differ by jurisdiction — the jurisdiction is named wherever this page discusses either. Prepared by the AXEVIL Capital research team.
What closed on the private market in the past two weeks
The rounds that priced, the tender offers that opened and the listings that filed — with the structure of each deal and the date on every figure. Written by the team that reads the paperwork.
Where to go from here
Securities lawWhat Is Rule 144? Definition, How It Works and ExamplesRule 144 sets when you can resell private or insider shares without registration: a six-month or one-year holding period, plus volume caps for insiders.
Securities lawWhat Is Regulation D? Definition, How It Works and ExamplesWhat is Regulation D? The SEC rules that let companies sell securities without registration. Rules 504, 506(b) and 506(c), limits and a worked example.
Securities lawWhat Is a Private Placement? Definition, How It Works and ExamplesA private placement is a sale of securities to chosen investors without SEC registration. Private placement agreement terms, rules and a worked example.