How to Qualify as an Accredited Investor, For Individuals and Entities

Suppose you want to gain early access to private investment opportunities, like startup equity, real estate funds, hedge funds, or venture capital. In that case, you may have come across the term “accredited investor.” This designation unlocks exclusive deal flow, but it's gated behind specific requirements set by the U.S. Securities and Exchange Commission (SEC).

While most people assume accredited status is just about having a high salary or net worth, it’s more nuanced than that. Both individuals and entities can qualify, and the criteria differ.

In this post, we’ll walk you through both paths:

• ✅ How individuals can qualify

• ✅ How entities can qualify

• 🧠 Why it matters for investors and startups alike

Let’s get you in the room where it happens.

👤 How Individuals Qualify as Accredited Investors

The SEC has laid out four primary ways an individual can become accredited. Each route is based on either wealth, income, or financial sophistication.

1. The Income Test

You qualify if you’ve earned:

• $200,000 or more per year (individually), or

• $300,000 jointly with a spouse or spousal equivalent,
  for the last two consecutive years with a reasonable expectation of earning the same this year.

💡 Pro tip: This income can include salary, bonuses, commissions, and self-employment earnings, but it is generally not capital gains or passive income.

2. The Net Worth Test

You qualify if your net worth exceeds $1 million, excluding the value of your primary residence.

You can include:

• Stocks and bonds

• Retirement accounts

• Crypto assets (if verifiable)

• Real estate (other than your home)

• Private equity holdings

🧾 Verification often includes brokerage statements, appraisals, or a letter from a licensed CPA, attorney, or investment adviser.

3. Professional Certifications

The SEC now recognizes financial sophistication through certain credentials:

• Series 7 – General Securities Representative

• Series 65 – Investment Adviser Representative

• Series 82 – Private Securities Offerings

Even if you’re not currently practicing, holding the license (in good standing) makes you accredited.

4. “Knowledgeable Employee” Status

Work for a private investment fund and have a role in managing or analyzing its investments. Regardless of income or net worth, you may qualify based on your functional expertise.

🧩 How Entities Qualify as Accredited Investors

An entity (like an LLC, trust, or corporation) can also be considered an accredited investor. This is especially important for family offices, holding companies, pooled vehicles, or venture firms.

Here are the seven primary routes for entities:

1. Entities With Over $5 Million in Assets

Any of the following can qualify:

• Corporations

• Partnerships

• LLCs

• Trusts

• 501(c)(3) nonprofits

…if they have more than $5 million in total assets and were not formed solely to invest in a specific offering.

2. Entities With Over $5 Million in Investments

This includes less common but consequential investor types:

• Indian tribes

• Foreign governments or subdivisions

• Governmental bodies

• Bank-administered collective investment trusts

These entities must also not be formed specifically to participate in a single deal.

3. Banks, Broker-Dealers, and Registered Financial Institutions

Automatically accredited:

• Banks

• Registered broker-dealers

• Savings and loan associations

• Insurance companies

• Registered investment companies (e.g., mutual funds)

• Business Development Companies (BDCs)

• Small Business Investment Companies (SBICs)

4. Registered and Exempt Investment Advisers

Your firm qualifies if it is:

• An SEC-registered or state-registered investment adviser

• An exempt reporting adviser

• A Rural Business Investment Company (RBIC)

These are presumed to have institutional-grade financial experience.

5. Family Offices and Family Clients

A family office can qualify if:

• It has $5 million or more in assets under management

• The person making investment decisions has financial expertise

In this case, family clients of that office can also qualify as accredited.

6. Entities Comprised Entirely of Accredited Investors

If every equity owner of the entity is individually accredited, the entity itself is accredited.

This is common in:

• SPVs (special purpose vehicles)

• Investment syndicates

• Startup pooling structures

7. Trusts With Sophisticated Decision-Makers

To qualify, the trust must:

• Have over $5 million in assets

• Not be created for one specific investment

• Be managed by someone with financial sophistication

🧭 Why Accreditation Matters (For Investors and Founders)

For Investors:

Accreditation opens access to:

• Private equity

• Startup and pre-IPO investing

• Venture capital

• Private placements and hedge funds

• Syndicates and angel networks

These opportunities are exempt from SEC registration but are only available to accredited investors under rules like Reg D, Rule 506(c).

For Founders & Fundraisers:

Knowing who qualifies as accredited helps:

• ✅ Design compliant investor funnels

• ✅ Structure Reg D or Reg CF raises correctly

• ✅ Avoid triggering SEC enforcement due to improper solicitation

💡 Under Rule 506(c), you can broadly advertise only if every investor is accredited and properly verified.

🚫 A Few Things That Don’t Qualify You

• Having high credit or low debt

• Getting an MBA or finance degree (unless it led to a cert like Series 65)

• Making a big one-time income in one year without the two-year average

• Starting a shell entity just to participate in a single offering

✅ Final Takeaway: Accreditation Is the Key to the Private Markets

Whether you’re a high-earning individual, a trust, a family office, or an LLC managing millions in assets, qualifying as an accredited investor can unlock early-stage access to the next generation of high-growth companies.

Documentation and compliance are critical, and third-party verification may be required, especially for deals under Rule 506(c).

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