According to the Security and Exchange Commission, an “accredited investor” includes anyone who:
- 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
- has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).
In addition, entities such as banks, partnerships, corporations, nonprofits and trusts may be accredited investors.
The purpose of the designation is to ensure that those who take on financial risks can afford to suffer financial losses.
Read more from the official source: SEC Investor Bulletin: Accredited Investors