An accredited investor, in the context of a natural person, includes anyone who:
A. Has an earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, or...
B. Has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
For the income test, the person must satisfy the thresholds for the three years consistently either alone or with a spouse, and cannot, for example, satisfy one year based on individual income and the next two years based on joint income with a spouse. The only exception is if a person is married within this period, in which case the person may satisfy the threshold on the basis of joint income for the years during which the person was married and on the basis of individual income for the prior years.
In addition, entities such as banks, partnerships, corporations, nonprofits, and trusts may be accredited investors. In order for these entities to be considered accredited investors, they must meet the following criteria:
A. Have total assets in excess of $5 million without being formed to specifically purchase the subject securities, or...
B. Be an entity in which all of the equity owners are already accredited investors.
Additionally, sophisticated persons can qualify to become accredited investors. In this context, a "sophisticated person" means the person must have, or the company or private fund offering the securities reasonably believes that this person has, sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment.
