How to Become an Accredited Investor If You Are an Individual or Entity

by | May 15, 2023 | Money and finance

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The definition of accredited investor as provided by the SEC is based on criteria that include meeting certain income or net worth thresholds or qualifying by other means that reflect the individual’s knowledge or financial sophistication. Individuals and entities have their own criteria to meet in order to qualify for accredited investor status. How to become an accredited investor from the vantage point of a person or an entity is important to know.

Let’s look at the requirements below.

Individual Requirements to Qualify
Persons interested in obtaining accredited investor status under the financial test need to qualify under one or the other of the following financial thresholds:

  • Earned income of more than $200,000 USD as an individual or joint income of more than $300,000 USD with a spouse or spousal equivalent.
  • Net worth of greater than $1 million USD (whether individually or with a spouse or spousal equivalent), not including the value of the person’s primary residence.

Other ways to qualify are through “measures of financial sophistication” that are basically covered by having certain professional qualifications and certifications.

For instance, individuals may qualify for accredited investor status if they are:

  • Executive officers, directors, or general partners of the company offering securities
  • Investment professionals who are in good standing, specifically who hold series 7, 65, and 82 licenses
  • Knowledgeable employees of a private fund for investments in that fund. For example, it includes certain executive officers of the fund, directors, and employees who participate in the investment activities of the fund.
  • A family client of a family office that fulfills the qualification criteria

Entity Requirements to Qualify
The SEC provides certain businesses with the opportunity to obtain accredited investor status. Depending on certain factors such as available assets and the entity’s structure, entities that fulfill the criteria below may qualify:

  • Entities having total assets greater than $5 million USD in value for entities that are partnerships, corporations, trusts, LLCs, 501(c)(3) organizations, family offices, or employee benefits plans.
  • Entities having investments greater than $5 million USD in value
  • SEC-registered broker dealers
  • Entities with equity owners who are all also accredited investors
  • Particular financial entities such as registered investment companies and insurance companies

How to become an accredited investor is important to know. Accredited investors have access to a number of investment types that ordinary investors don’t. Whether you are an individual or part of an entity that can qualify as accredited investor status, there are various ways to achieve this desirable financial status.

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