An accredited investor is a person or entity the SEC allows to buy certain private, unregistered investments. Individuals qualify with income over $200,000 ($300,000 with a spouse or partner) in each of the last two years, a net worth over $1 million excluding their home, or certain securities licenses such as the Series 7, 65 or 82.
You may have seen the phrase "accredited investors only" on a private fund, a real estate deal or a startup round and wondered whether it applies to you. Maybe your income crossed a threshold recently, or a sale of a business pushed your net worth up. Knowing exactly where the lines sit tells you which doors are open and, just as important, what protections you give up when you walk through them.
What does accredited investor mean?
It is a legal category, not a credential or a license you apply for. The SEC uses it to decide who may invest in many private offerings that skip full SEC registration. According to the SEC's accredited investor guide for small businesses, many offering exemptions "limit participation to accredited investors or contain restrictions on participation by non-accredited investors."
The idea behind the rule is that people with more income, wealth or professional knowledge can evaluate risk and absorb a loss without the full disclosure package a public offering provides. It says nothing about whether a specific investment is good.
What are the accredited investor requirements for individuals?
An individual needs to meet only one of the following tests.
The income test
Income over $200,000 on your own, or over $300,000 together with a spouse or spousal equivalent, in each of the two most recent years, with a reasonable expectation of reaching the same level this year. One strong year is not enough.
The net worth test
Net worth over $1 million, alone or together with a spouse or partner, not counting your primary residence. This is the test that trips people up most often, because home equity is usually the largest asset a household owns.
The professional test
People in good standing who hold a Series 7, Series 65 or Series 82 license qualify regardless of income or wealth, according to the SEC. So do directors, executive officers and general partners of the company selling the securities, and "knowledgeable employees" of a private fund investing in that fund.
How do the numbers work in practice?
The easiest way to see the rules is to run a few households through them.
| Household | Income, last 2 years | Net worth excl. home | Accredited? |
|---|---|---|---|
| Single, salaried | $215,000 and $230,000 | $400,000 | Yes, by income |
| Married couple | $180,000 and $190,000 combined | $1.3 million | Yes, by net worth |
| Married couple | $290,000 and $320,000 combined | $700,000 | No: joint income fell below $300,000 in one year |
| Retired, single | $60,000 | $900,000 plus a $600,000 paid-off home | No: the home does not count |
| Financial adviser | $90,000 | $150,000 | Yes, if holding an active Series 65 |
The fourth row is the common surprise. A retiree with $1.5 million in total assets can still fall short because the house is excluded.
Can a trust, LLC or company be an accredited investor?
Yes. The SEC lists several routes for entities, and each works independently.
Entities with more than $5 million
Corporations, partnerships, LLCs, trusts, 501(c)(3) organizations and employee benefit plans with assets over $5 million qualify. Separately, an entity that owns investments over $5 million qualifies.
Entities owned entirely by accredited investors
If every equity owner of the entity is accredited, the entity is accredited too, regardless of its own size.
Financial institutions and advisers
Banks, insurance companies, registered investment companies, business development companies, SEC- or state-registered investment advisers and registered broker-dealers all qualify by their nature.
How do you prove you are an accredited investor?
It depends on how the offering is run. Under Rule 506(c), where the company is allowed to advertise publicly, it must take "reasonable steps to verify" that every buyer is accredited. In practice that usually means tax returns or W-2s for the income test, account statements and a credit report for the net worth test, or a signed letter from your CPA, attorney or a registered investment adviser.
Under Rule 506(b), which bans general advertising, the company may rely on a questionnaire where you certify your status. Either way, expect to fill out a subscription agreement that asks you to confirm it in writing.
What do you give up as an accredited investor?
Access comes with fewer protections, and it is worth being honest about that before investing.
- Less disclosure. Private offerings do not go through SEC review. You get whatever the issuer puts in its offering documents.
- Restricted securities. Shares or notes bought in a private placement usually cannot be resold freely, so your money may be tied up for years.
- Higher minimums. Private offerings often set minimums in the tens or hundreds of thousands of dollars, which makes diversification harder.
- Loss of capital. Private companies and funds can fail, and there is no market price to warn you early.
Qualifying is a legal threshold, not a signal that private investments suit you. The due diligence checklist in our guide to spotting investment fraud is a sensible first read before any private deal.
Where accredited status shows up
Accredited status opens up private placements, many hedge funds, private credit and real estate funds, and some venture deals. Our explainer on what a private placement is covers how those offerings are structured. Freedom Merchant Exchange, for example, offers its merchant cash advance investment terms to accredited investors only, through a private placement memorandum; you can request the overview if that category interests you.
Frequently asked questions
Does my house count toward accredited investor net worth?
No. Your primary residence is excluded from the $1 million net worth test, according to the SEC. Vacation homes and investment properties can count at their equity value.
Can I combine income with my spouse to qualify?
Yes. The joint threshold is $300,000 of combined income with a spouse or spousal equivalent in each of the two most recent years. If you use the individual test instead, the threshold is $200,000.
Do I have to register or apply to become an accredited investor?
No. There is no government registry or application. Each offering checks your status, either through a self-certification questionnaire under Rule 506(b) or through verification documents under Rule 506(c).
Does a Series 65 license make me an accredited investor?
Yes, as long as the license is in good standing. The SEC lists the Series 7, Series 65 and Series 82 as qualifying professional credentials, regardless of income or net worth.
Is an accredited investor the same as a qualified purchaser?
No. A qualified purchaser is a higher bar used by some private funds, generally starting at $5 million in investments for individuals. Every qualified purchaser is accredited, but most accredited investors are not qualified purchasers.
Related: What is a private placement? · How to spot investment fraud · How to choose a financial advisor