An accredited investor is a person or entity that satisfies one of the income, net worth, or professional-credential tests in SEC Rule 501(a) of Regulation D (17 CFR 230.501(a)), which lets a startup sell securities to that investor without registering the offering.

This definition sits at the center of almost every early-stage raise. Most seed and Series A rounds are sold under Rule 506 of Regulation D, and the cleanest version, Rule 506(b), lets you sell to an unlimited number of accredited investors while sharply restricting sales to anyone else. Knowing who qualifies keeps your round inside the exemption.

Who qualifies: the natural-person tests

An individual is accredited under 17 CFR 230.501(a) by meeting any one of these tests:

  • Income. Individual income over $200,000 in each of the two most recent years, or joint income with a spouse or spousal equivalent over $300,000 in each of those years, with a reasonable expectation of the same in the current year (Rule 501(a)(6)).
  • Net worth. Individual or joint net worth over $1 million, excluding the value of the person’s primary residence (Rule 501(a)(5)).
  • Professional credentials. Holding, in good standing, a Series 7, Series 65, or Series 82 license. The SEC designated these three FINRA licenses by order in 2020 under Rule 501(a)(10).

Most of the individual angel investors you meet qualify under the income or net worth test.

Entity and other categories

Entities reach accredited status through their own paths under Rule 501(a). Common ones include a corporation, partnership, LLC, or 501(c)(3) organization with assets over $5 million (Rule 501(a)(3)); banks, registered broker-dealers, and registered investment companies (Rule 501(a)(1)); family offices with over $5 million under management (Rule 501(a)(12)); and “knowledgeable employees” of a private-fund issuer (Rule 501(a)(11)). An entity in which all of the equity owners are themselves accredited also qualifies.

Why accredited investor status matters for your raise

Confirm that every purchaser in a Rule 506(b) round is an accredited investor before you accept the check. If you advertise the raise publicly, you must instead use Rule 506(c), which requires you to take reasonable steps to verify accredited status rather than rely on the investor’s own questionnaire. Getting this wrong can blow the exemption and create a rescission right for your investors. The instrument does not change the analysis, so the same test applies whether the investor buys a SAFE, a convertible promissory note, or preferred stock.

Currency note: these thresholds are current as of the rule text on the eCFR, with 17 CFR 230.501 last amended February 18, 2025. The core dollar figures ($200,000 and $300,000 income, $1 million net worth) are not indexed to inflation and are unchanged from the 2020 modernization of the definition.

This is general information, not legal advice.