Accredited Investor Requirements for an LLC or Other Entity
An LLC, corporation or partnership is an accredited investor under Rule 501(a) if it has more than $5 million in total assets and was not formed for the specific purpose of buying the securities, or if every one of its equity owners is an accredited investor. Entity types the rule does not otherwise list can qualify with more than $5 million in investments, and family offices, family clients and certain financial institutions have their own categories.
Most small investing LLCs qualify the second way: the sponsor looks through to the owners. This guide lists every entity path in the rule, explains the "formed to invest" condition, and gives a decision table and worked examples. For the individual tests, see the accredited investor definition; for trusts, see accredited investor trust requirements. Rules are as of October 2026.
Which entities can be accredited investors?
Here is every entity path in Rule 501(a), in the rule's order.
| Rule | Who | Condition |
|---|---|---|
| 501(a)(1) | Banks, savings institutions, registered broker-dealers, SEC- and state-registered investment advisers, exempt reporting advisers, insurance companies, registered investment companies, business development companies, SBICs, rural business investment companies | Status alone, with asset tests only for certain plans |
| 501(a)(1) | State and local government employee plans; ERISA plans | Over $5M in assets, or (ERISA) decisions made by a bank, insurer or registered adviser as fiduciary, or a self-directed plan run only by accredited investors |
| 501(a)(2) | Private business development companies | Status alone |
| 501(a)(3) | 501(c)(3) organizations, corporations, Massachusetts or similar business trusts, partnerships, LLCs | Total assets over $5M and not formed for the specific purpose of acquiring the securities |
| 501(a)(7) | Trusts | Total assets over $5M, not formed to acquire the securities, purchase directed by a sophisticated person |
| 501(a)(8) | Any entity | All equity owners are accredited investors |
| 501(a)(9) | Entities of a type not listed in (a)(1), (2), (3), (7) or (8) | Investments over $5M and not formed to acquire the securities |
| 501(a)(12) | Family offices | Assets under management over $5M, not formed to acquire the securities, investment directed by a person able to evaluate it |
| 501(a)(13) | Family clients of such a family office | The investment is directed by that family office |
LLCs were added to (a)(3) by the 2020 amendments, which, in the SEC's words, "codified a long-standing staff interpretation." The same amendments added the investments test, the family office categories and the adviser categories.
How does the $5 million total assets test work?
Rule 501(a)(3) looks at total assets, not net worth. An LLC that owns a $6,000,000 property with a $4,500,000 mortgage has total assets of $6,000,000 and passes the dollar test, even though its equity is $1,500,000. The SEC staff has also said that when an investor's financial statements may be combined with a subsidiary's or affiliate's under generally accepted accounting principles, their assets can be added together for this test.
The test is about the investing entity, not the people behind it. A corporation with $2,000,000 of net worth cannot use the individual net worth test, because the SEC staff reads Rule 501(a)(5) as limited to natural persons.
When can an entity qualify by looking through to its owners?
Rule 501(a)(8) accredits "any entity in which all of the equity owners are accredited investors." A note to the rule, added in 2020, says the sponsor may look through various forms of equity ownership to natural persons. So if Smith Holdings LLC is owned by Smith Family LLC, which is owned by two spouses who are each accredited, Smith Holdings qualifies.
Three points from the SEC staff's interpretations matter here:
- All means all. A corporation with one non-accredited director who holds a single qualifying share is not accredited under (a)(8).
- Equity owners of a limited partnership are the limited partners.
- No "formed to invest" condition. Section (a)(8) has none, so a new LLC owned only by accredited people qualifies.
Most two-spouse or single-owner investing LLCs use this route.
What is the 2020 "investments over $5 million" test?
Rule 501(a)(9) accredits an entity "of a type not listed" elsewhere in the rule, not formed to acquire the securities, that owns investments of more than $5,000,000. "Investments" comes from Investment Company Act Rule 2a51-1(b) and includes securities, real estate held for investment, commodity interests and cash and cash equivalents, among others.
Because LLCs, corporations and partnerships are already listed in (a)(3), they use the total assets test. The investments test is for entity types the rule did not otherwise reach.
What does "not formed for the specific purpose" mean?
Rules 501(a)(3), (a)(7), (a)(9) and (a)(12) all exclude an entity "formed for the specific purpose of acquiring the securities offered." The aim is to stop people from pooling money into a new vehicle that crosses $5 million only to buy one deal.
The SEC staff applied it in an example of an investment partnership organized two years earlier, where partners chose deal by deal whether to take part. Because the partners opted in for each investment, the partnership was treated as organized for the specific purpose of each one, and the issuer had to look through to the participating partners.
Formation for a specific purpose also changes counting in a 506(b) deal: under Rule 501(e)(2), each owner of such an entity counts as a separate purchaser unless the entity is accredited under (a)(8).
Which route fits your entity? A decision table
| Question | If yes | If no |
|---|---|---|
| Is every equity owner accredited (looking through layers)? | Accredited under 501(a)(8) | Go on |
| Is it a corporation, partnership, LLC, business trust or 501(c)(3) with total assets over $5M, not formed for this deal? | Accredited under 501(a)(3) | Go on |
| Is it a trust with over $5M, not formed for this deal, directed by a sophisticated person? | Accredited under 501(a)(7) | Go on |
| Is it a family office (or its family client) meeting the family office conditions? | Accredited under 501(a)(12) or (13) | Go on |
| Is it another type of entity with over $5M of investments, not formed for this deal? | Accredited under 501(a)(9) | Go on |
| Is it a bank, broker-dealer, registered or exempt reporting adviser, insurer or other listed institution? | Accredited under 501(a)(1) or (2) | Not accredited |
Worked examples (hypothetical, for illustration only).
| Entity | Facts | Result |
|---|---|---|
| Operating company LLC | Formed in 2012, owns a warehouse and equipment, total assets $7,000,000 | Accredited under (a)(3) |
| Family holding LLC | $3,000,000 in assets, owned 50/50 by two spouses, each accredited through joint net worth | Accredited under (a)(8) |
| New pooling LLC | Formed last month by four friends to put $400,000 into one deal; one friend is not accredited | Not accredited: not all owners qualify, and it was formed for this deal |
| S corporation | $2,000,000 net worth, one shareholder with $350,000 of income in each of the last two years and the same expected this year | Accredited under (a)(8) through its shareholder |
| Leveraged property LLC | Formed in 2019, total assets $5,400,000, debt $4,800,000, owners not all accredited | Accredited under (a)(3): the test is total assets |
The pooling LLC cannot invest in a 506(c) deal. In a 506(b) deal that accepts non-accredited purchasers, Rule 501(e)(2) would look through it: the friend who is not accredited counts toward the limit of 35, while the three accredited friends are left out of the count, as accredited investors always are.
What does a sponsor ask an entity for?
Under 506(c) the sponsor must take reasonable steps to verify. For an entity that usually means formation documents and an ownership list, plus one of: financial statements or bank and brokerage statements showing total assets or investments over $5 million, or verification of each owner for the look-through. A letter from a registered broker-dealer, SEC-registered investment adviser, licensed attorney or CPA works for entities as well. The person signing should be the entity's manager or an authorized officer. See accredited investor verification for the methods and investing through an LLC, trust or IRA for the paperwork side.
How DoorRaise fits in
DoorRaise helps sponsors raise equity for apartment buildings with 5 or more units from their friends and followers, and takes verified accredited investors only, under Rule 506(c) by default or 506(b). An investor can invest as an LLC or corporation and pick the category it relies on, including an entity with over $5 million in assets or one owned only by accredited investors. Entities can verify by investing $1,000,000 or more with written statements, by a letter from an SEC-registered investment adviser or registered broker-dealer, or with documents. The free accredited investor check helps an investor see which category fits. Investors fund by wire into escrow at Enterprise Bank & Trust, an independent bank. Fees are $1,500 to set up (non-refundable), $5,000 at closing (only if the deal closes) and $3,500 a year.
Raise your apartment deal from the people who already follow you.
DoorRaise is built for apartment buildings with 5 or more units: one link for the deal, escrow until closing and a standard fee card.
Sponsors can start a deal page for free.
FAQ
Can an LLC be an accredited investor?
Yes. An LLC is accredited if it has more than $5 million in total assets and was not formed to buy the securities offered, or if all of its members are accredited investors.
What are the accredited investor requirements for an entity?
It depends on the type. Most operating entities use the $5 million total assets test or the all-owners test. Trusts, family offices and entity types not otherwise listed have their own tests, and banks, broker-dealers and registered advisers qualify by status.
Can a corporation be an accredited investor?
Yes, with total assets over $5 million (if not formed for the deal) or if every shareholder is accredited. A corporation cannot use the $1 million net worth test, which is for natural persons.
What does "body corporate" mean for accredited investors?
Rule 501 does not use the term "body corporate"; it appears in other countries' rules. Under U.S. Regulation D, the closest category is a corporation under Rule 501(a)(3).
Does a newly formed LLC qualify?
Only through its owners. A new LLC formed for this investment fails the $5 million tests, but it is accredited if every member is.
Sources
- 17 CFR 230.501, definitions used in Regulation D (Cornell LII)
- 17 CFR 270.2a51-1, definition of investments (Cornell LII)
- SEC: Securities Act Rules Compliance and Disclosure Interpretations, Questions 255.05 to 255.41
- SEC: Amendments to the accredited investor definition, small entity compliance guide
This article is general information, not legal, tax or investment advice. The facts of each entity matter, so confirm the route with your own attorney. Every investment can lose money. DoorRaise is not a law firm, broker-dealer, investment adviser or funding portal.