What Is the Difference Between an Accredited Investor and a Qualified Purchaser?
Many people struggle with the basics of finance and investment. This is certainly understandable, however. Investment is a complicated business! However, the deeper involved you become with the industry, the easier it becomes to tell what’s what. One concept that confuses even experienced investment professionals is how qualified purchasers and accredited investors differ. Here’s what you need to know.
About Accredited Investors
Essentially, accredited investors are individuals or entities either with a lot of money or with a certain amount of sophistication. For individuals, accredited investor status, generally requires that you must possess a net worth of at least $1 million or have an annual income exceeding $200,000 (or $300,000 with a spouse). Accredited investors fund over a trillion dollars a year into deals that regular people who are not accredited do not have access to. Some deals require not only that you are an accredited investor, but that you prove it. Want a way to prove that you’re an accredited investor? Your attorney, CPA, or a dedicated third party like VerifyInvestor.com can provide verification of your accredited investor status. Once you’ve got that verification, it opens up another set of investment deals that you’re eligible to invest in as a verified accredited investor.
About Qualified Purchasers
Qualified purchasers are even more rare as the thresholds to qualify as a qualified purchaser are significantly higher. For example, while an individual only needs $1,000,000 to meet the accredited investor definition, to be a qualified purchaser, the individual needs $5,000,000 in investments. Larger companies need to have in excess of $25,000,000 in investments to be a qualified purchaser instead of the $5,000,000 assets threshold for accredited investors. Smaller, closely held companies need investments exceeding $5,000,000. Qualified purchasers have an even wider range of options as far as where they can put their money.
Knowing whether you are an accredited investor or a qualified purchaser will dictate the type of deals you can invest in. For companies raising capital from an accredited investor or qualified purchaser, be careful to note when you must require that someone is an accredited investor, and when they must be a qualified purchaser.