The Securities and Exchange Commission (“SEC”) defines “accredited investors” as anyone who has annual earned income over $200,000 ($300,000 for couples) for the last two years and expects to maintain this income level in the current year or has a net worth over $1 million, excluding the value of a primary home.
Accredited investors can also include trusts with assets over $5 million or entities in which all of its owners are accredited investors.
The purpose of the accredited investor standard under Regulation D of the Securities Act of 1933 is to help small companies identify financially astute investors who presumably can afford to invest in young companies. Companies that raise equity funds from accredited investors usually don’t have to incur the high legal and accounting costs associated with registering the securities offering with the SEC.
Most members of angel investment clubs are accredited investors. Search the Start on Purpose Funding Directory for angel investment clubs near you.