What is an Accredited Investor?

What is an accredited investor?

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An “accredited investor” is a status defined by the SEC to describe someone legally allowed to invest in certain investment offerings – including offerings conducted under Rule 506 of Regulation D. Individuals and entities qualify as accredited investors if they meet certain income or net worth thresholds.

An individual investor qualifies if they meet at least one of the following criteria:

  1. Earned at least $200,000 a year for the last 2 years and expects to earn at least $200,000 this year.

  2. Earned a combined annual income of at least $300,000 jointly with their spouse for the last 2 years and expects to make at least $300,000 together this year.

  3. Has a net worth of at least $1 million, excluding their personal residence. Net worth can be calculated jointly with a spouse.

An entity, including trusts or partnerships, would qualify as an accredited investor if it meets at least one of the following criteria:

  1. Has more than $5 million in assets and is not formed specifically to acquire the securities offered.

  2. An entity whose owners all individually qualify as accredited investors.