What Investments Can Accredited Investors Make?
The US Securities and Exchange Commission defines an accredited investor as someone with an income over $200,000 in each of the two most recent years. For spouses, they must have a joint income that exceeds $300,000. Either way, in order to qualify as an accredited investor, there needs to be a reasonable expectation that they will earn the same level of income in the current year. This definition is dictated in Rule 501 of Regulation D of the Securities Act of 1933 (Reg. D). A net worth test may also be used to determine if a person qualifies as an accredited investor. Accredited investors have a net worth that exceeds $1 million, either alone, with a spouse, or with a spousal equivalent.
Can an LLC be an Accredited Investor?
The term “accredited investor” may apply to individuals and business entities alike, as long as they fit the definition set by the SEC. Accredited investors get access to exclusive investment vehicles and securities by simply satisfying at least one of the set requirements: income, net worth, asset size, or professional certifications. An accredited investor has access to these riskier ventures because they are seen as having financial sophistication and sufficient investment experience. Thanks to their net worth and income, they do not need the protection provided by the liquidity of public securities markets.