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The following is a list of net
worth requirements for typical investors we encounter:
- Individuals - Minimum net worth, or joint net worth with spouse, inclusive of home, home furnishings and personal automobiles of more than $1,000,000 or individual income in
excess of $200,000, or joint income with spouse of $300,000, in each of the two
most recent years, and a reasonable expectation of reaching the same income
level in the current year.
- Entities - Corporations,
partnerships and irrevocable
trusts must have total assets in excess of $5,000,000, and not be formed for the purpose of acquiring
the investment, with an additional requirement for trusts that the person
running the trust be a sophisticated investor able to evaluate the merits and
risks.
- LLC's - Same rules as above depending on whether the LLC is a sole member (ignored for tax purposes, so the individual net worth or income requirements apply) or has elected to be taxed as a partnership or corporation.
- Living Trusts - Until the person dies, his living trust is revocable
and is ignored for tax purposes so the rules for individuals apply. After the person
dies, the trust rules ($5,000,000) will likely apply, but check with your tax
advisor.
- If
the entity itself does not
have a $5,000,000 net worth,
it may still qualify if
every owner of the entity
can qualify under #1 above.
- Retirement Plans - No minimum if the plan is a Qualified Plan and the fiduciary making decisions is a bank, savings and loan association, insurance company or registered investment advisor, otherwise net worth in excess of $5,000,000 unless the plan is a self directed plan with investment decisions made solely by persons who are accredited investors.
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There are other entities mentioned, but we do
not usually encounter them. Please refer
to your advisor or Regulation D for other entities. A TIC, DST or oil &
gas buyer must
meet the net worth requirements to be an
"accredited investor". Generally
such offerings are only made available
to accredited investors.
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