Accredited investor is the baseline standard for private fund investing. For natural persons, it requires $200,000 in individual income ($300,000 joint) for the prior two years with a reasonable expectation of the same in the current year, or $1 million in net worth excluding a primary residence.
Certain entities also qualify: corporations, partnerships, and trusts with more than $5 million in assets, as well as entities in which all equity owners are individually accredited. In 2020, the SEC expanded the definition to include holders of certain professional certifications (Series 7, Series 65, and Series 82 licenses), "knowledgeable employees" of private funds and SEC- and state-registered investment advisers, and family offices with at least $5 million in assets under management.
Qualified purchaser is a higher bar: $5 million or more in investments for natural persons, or $25 million for entities. Note that this is measured by investments, not net worth. Real estate used as a primary residence, personal property, and business assets not held for investment purposes do not count toward the $5 million threshold.
All qualified purchasers are typically accredited investors, but most accredited investors are not qualified purchasers. The distinction matters when choosing between a 3(c)(1) structure (accredited investors, 100-person limit) and a 3(c)(7) structure (qualified purchasers only, no headcount limit).
See Accredited Investor vs. Qualified Purchaser vs. Qualified Client for a full comparison of all three investor classifications.
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