January 17, 2023

How Do You Know if You’re an Accredited Investor?

How Do You Know if You’re an Accredited Investor?

Make sure you’re taking advantage of the full breadth of investment opportunities available to you.

Accredited Investors have access to unique opportunities to build their wealth, but how do you know if you’re eligible? 

In this article, we’ll explain what an Accredited Investor is, how to find out if you qualify as one, and which opportunities you can take advantage of once you become Accredited. 

How to Find Out if You’re Accredited

There’s no formal application process for becoming an Accredited Investor, and unless you’re working with an advisor who fills you in, you may not even realize when you first become Accredited. 

In the U.S., individuals must qualify in one or more of these categories in order to be classified as an Accredited Investor. These criteria are established by the Securities and Exchange Commission:

Income: An individual with an annual income greater than $200,000 — or a joint annual income greater than $300,000 — for the past two years. You must also have the expectation that you will earn $200,000 or more in 2023.

Net Worth: A person who’s net worth exceeds $1 million — either individually or jointly with a spouse — not including the value of your primary residence. 

Company Involvement: If you’re a general partner, executive officer, or director of a private company, you qualify as an Accredited Investor for that specific company, even if you don’t meet any other criteria. This also applies to “knowledgeable employees” of a private fund. 

Expertise: A person who holds one or more certifications, designations, or credentials from an SEC-approved educational institution. SEC and state-registered brokers and investment advisors also qualify.  

Can a Business Entity Be an Accredited Investor?

Business entities can also qualify as Accredited Investors in one of two ways.

If a private business development company or organization has more than $5 million in assets or investments, they are Accredited.

Or, if all of an entity’s equity owners are Accredited Investors, the entity itself is also Accredited. 

Benefits of Becoming an Accredited Investor

Accredited Investors are the only people and entities that can invest in private securities that are not registered through the SEC. 

If you’re Accredited, you can also invest in hedge funds, private equity funds, venture capital, equity crowdfunding, angel investments, and other exclusive opportunities that aren’t available to other investors. 

This is because people who meet the requirements for accreditation are considered to be more financially literate than the average American. Plus, the SEC believes you have enough wealth to withstand higher levels of investment risk. 

What to Do Once You Meet the Accredited Investor Criteria

If you meet any of the above criteria then there’s good news for you: You’re already an Accredited Investor! Yes, it’s really that easy. You don’t need to fill out an application or wait for some special certification from the SEC.

When you decide to invest in an opportunity that’s only available to Accredited Investors, the person or company issuing the securities will be required to verify your Accreditation status. They’ll likely have you fill out a questionnaire, and submit documentation like a W-2, credit report, balance sheet, or financial statement, depending on the specific criteria you qualify under. 

It’s the syndicator’s job to verify your status before you invest, but keep in mind: If someone tries to accept your money without verifying your accreditation status, that is a major warning sign. This shows that the person or company is not careful about following all regulations, and they may be just as reckless with your investment. 

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Find an Investment Partner Who Understands Your Needs

Accredited Investors have a unique opportunity to build wealth, but that opportunity also comes with unique risks. When you’re newly Accredited, it’s especially important to find partners you can trust to help you understand the opportunities available to you and select the best vehicles for reaching your investment goals.

At FGCPTM, we’re passionate about helping Accredited Investors access tax efficient, cash flowing direct investments, whether you are newly Accredited, are a first-generation investor, or have been an Accredited Investor for years. 

If you’re interested in learning more, please fill out this form to get in touch.

January 17, 2023
Billy Keels