The Accredited Investor Questionnaire: A Founder's Guide

The Accredited Investor Questionnaire: A Founder's Section-by-Section Guide

Somewhere between the term sheet and the wire, every founder discovers the same unglamorous document: the Accredited Investor Questionnaire. It is not the pitch deck. It is not the SAFE. It is not the board consent. It is the two- or three-page form that each investor signs before their money can legally enter your bank account — and it is the document most founders send back to counsel because they do not understand what it is asking or why.

This guide walks through the standard questionnaire one section at a time. For each block you will find what the section is doing legally, what the investor is being asked to certify, the mistakes founders make when they collect these forms, and how a careful reader — your outside counsel, your future acquirer's diligence team, the SEC staff attorney reviewing a Form D — evaluates what came back. By the end you will understand why the form exists, why every checkbox matters, and why "we'll sort it out later" is the single most expensive sentence in a private financing.

The Securities Act of 1933 makes it illegal to sell securities in the United States unless the offering is either registered with the SEC or fits inside an exemption. Registration is what public companies do. Exemptions are what private companies live inside. The exemption almost every startup relies on is Regulation D — specifically Rule 506(b) or Rule 506(c) — and both exemptions turn on a single question: is the person buying your securities an accredited investor?

The questionnaire is the piece of paper that answers that question. It shifts the factual burden from you (who cannot know a stranger's tax returns) to the investor (who does). It gives you a written, signed representation you can rely on. It gives your counsel something to attach to the closing binder. And in a 506(c) offering, where general solicitation is permitted, it is the starting point for the "reasonable steps" you are legally required to take to verify accreditation.

If you skip it, the offering is no longer exempt. The securities become rescindable at the investor's option. Your next-round investors will find the defect in diligence and require you to cure it. Your acquirer will hold back purchase price until you can produce clean forms for every historical investor. This is not paperwork. This is the wall between "clean cap table" and "cap table with a legal problem."

The first substantive block asks a natural person to represent, under one of two tests, that they qualify as an accredited investor. The first test is a net-worth test: net worth in excess of $1,000,000, individually or jointly with a spouse. The second is an income test: individual income above $200,000, or joint income with a spouse above $300,000, in each of the two most recent years, with a reasonable expectation of the same in the current year.

The definitions matter, and the template spells them out for a reason. "Net worth" is not the number the investor would write on a mortgage application. It is total assets minus total liabilities, with the fair market value of the primary residence excluded from assets, and any mortgage debt above the fair market value of the residence added back as a liability. This last part surprises investors who bought at the top and refinanced: an underwater primary residence actively reduces net worth for accreditation purposes, even though a bank would still call them wealthy.

"Individual income" is adjusted gross income, adjusted for a specific set of add-backs — tax-exempt interest, partnership losses claimed as a partner, depletion deductions, long-term capital gain deductions. The point of the add-backs is to prevent an investor from qualifying through pure paper losses. "Joint income" is defined the same way, except spousal income and property income are included.

The mistake founders make: assuming everyone who "seems rich" checks one of these boxes. Silicon Valley engineers with $2M in vested but illiquid private-company stock frequently fail the net-worth test once you strip out the underwater house and treat the private stock at a defensible value. Small-business owners who take low salaries and reinvest often fail the income test even when the business is worth eight figures. The questionnaire is the point where you find out. It is also the point where a rejected checkbox tells you the investor cannot legally participate — and where a friend-of-the-founder round quietly loses two of its participants.

Newer amendments to Rule 501 also allow individuals to qualify based on holding certain professional certifications (currently Series 7, Series 65, and Series 82). Many older templates predate this. If your investors include a licensed adviser, ask counsel whether to add the "knowledgeable person" categories rather than force a bright-line financial test.

If the investor is a trust, the form asks it to fit into one of two categories: a revocable trust (such as a living trust) or an intentionally-formed trust whose grantor is themselves accredited, or an irrevocable trust with more than $5,000,000 in assets, not formed for the specific purpose of acquiring your securities, whose purchase is directed by a "sophisticated person."

The revocable-trust box is the one that catches out family investors. Wealthy individuals commonly hold their liquid assets in a revocable living trust for estate-planning reasons. The trust itself has no meaningful legal identity — the grantor is the accredited person. The questionnaire handles this cleanly by asking the grantor to identify themselves and check the individual category they qualify under. If your investor forwards you a document titled "The Smith Family Trust," do not stop at the trust name — walk the grantor through Section 1(a) and record their basis for individual accreditation on the same form.

The $5,000,000 irrevocable-trust box has two words that carry legal weight: "not formed for the specific purpose of acquiring." A trust hastily created by a family the week before your closing to consolidate a check will fail this test. Sophisticated readers spot the pattern by comparing the trust formation date to the closing date. If they are within weeks of each other, the trust must qualify under a different category or the check has to come from somewhere else.

This block is the longest because entity accreditation has the most permutations. The categories track the underlying rule: ERISA plans meeting one of three sub-tests; 501(c)(3) organizations, corporations, partnerships, LLCs, and business trusts with more than $5,000,000 in assets and not formed for the specific purpose of acquiring your securities; banks and savings institutions; registered broker-dealers; insurance companies; registered investment companies and business development companies; SBICs; state or municipal employee benefit plans with more than $5,000,000 in assets; and private business development companies under the Investment Advisers Act.

The category founders reach for by default is the last one on the list: an entity in which all of the equity owners are themselves accredited. This is the "friends and family LLC" bucket, and it is the one most likely to be filled in wrongly. The form requires the entity to list each equity owner and identify the individual category each owner satisfies. Most founders receive a checked box and no list. Send it back. Without the list, you have no factual basis to rely on the representation, and your counsel cannot verify the chain when diligence comes.

The $5,000,000 threshold for standard operating entities exists to keep undercapitalized shell companies out of private offerings. It also creates the failure mode where a small consulting LLC an investor wants to write through simply does not qualify. In those cases the investor can usually check personally as an individual instead — but you have to ask, and the wire has to come from a personal account matching the signature.

The "not formed for the specific purpose of acquiring" language shows up again here. If a group of individuals forms an LLC to pool their checks into your round, and the LLC itself was created for that purpose, the LLC cannot use its own assets to qualify; every underlying member must be accredited and disclosed. Special-purpose vehicles used by syndicate leads solve this by qualifying under the all-equity-owners-accredited category — but only if the SPV manager keeps clean records of every LP.

The second numbered section is the mirror image of Section 1 for investors outside the United States. If the investor checks the box, they are relying on Regulation S, not Regulation D. Regulation S provides a safe harbor for offers and sales made outside the United States, and its central question is not wealth but geography.

The representations are detailed by design. The investor certifies they are not a U.S. natural-person resident, not organized under U.S. law, not an estate or trust with U.S. fiduciaries, not a U.S. branch of a foreign entity, not a discretionary or non-discretionary account held by a U.S. dealer, and not a foreign entity formed by a U.S. person for the purpose of investing in unregistered securities. They further certify that they are not fifty percent or more beneficially owned by U.S. persons, that any trust does not have U.S. beneficiaries or U.S. trustees with investment discretion, and that they are not acquiring the securities for or on behalf of any U.S. person.

The transfer restrictions clause at the end is what makes Regulation S work. The investor promises not to transfer the securities to any other person unless the transferee makes the same representations, or the securities are registered, or an exemption is available, and until the applicable "distribution compliance period" has expired (typically six months for a domestic reporting issuer, one year for a non-reporting issuer). Founders who accept foreign investment without this section signed have not actually availed themselves of the Regulation S exemption — they have made an unregistered U.S. offering to a person who happens to live abroad, which is not the same thing.

The common founder mistake is treating a foreign investor as easier because "the SEC doesn't apply to them." The SEC does apply — it is the reason Regulation S exists. The safe harbor is available only if the offer and sale actually took place outside the United States, which means no directed selling efforts into the U.S., no U.S.-based marketing calls, and often no U.S.-based introduction. If your foreign investor first heard about the round at a demo day in San Francisco, Regulation S is not clean, and the investor should almost always be qualified under Regulation D instead if they can be.

The signature block does more work than it looks. It records the investor's legal name, the entity capacity in which they are signing, the date, and — in most templates — the exact dollar amount subscribed. That last field is what ties the questionnaire to the wire and to the security being issued.

A recurring closing-day fire drill: the investor signs the SAFE for $50,000, the questionnaire for $50,000, and wires $47,500 because their bank subtracted a fee. Your cap-table software issues a $47,500 SAFE. Your questionnaire says $50,000. Your Form D reports $50,000. Two years later an acquirer's counsel asks which number is right and you spend a week reconstructing bank confirmations. Fix this in real time by reconciling every wire against every subscription document before you countersign, and by issuing SAFEs or notes for the dollar amount actually received, not the amount promised.

For a Rule 506(b) offering — no general solicitation — you are allowed to rely on the investor's written representation of accredited status, provided you do not have knowledge to the contrary. The questionnaire is the representation. Your job is to read it, notice the obvious contradictions (a founder-friend who complained last month about being tapped out and then checks the $1M net-worth box), and act on what you actually know.

For a Rule 506(c) offering — general solicitation permitted, meaning you talked about the round publicly — you must take reasonable steps to verify accreditation, not merely accept a representation. Common paths include reviewing tax returns for the two most recent years, reviewing bank and brokerage statements dated within the last three months, obtaining a written confirmation from a licensed CPA, attorney, registered broker-dealer, or investment adviser, or using a third-party verification service. The questionnaire alone does not satisfy 506(c). It is the on-ramp to the verification file, not the verification.

Most founders default into 506(c) accidentally. Tweeting "we're raising" is general solicitation. Publishing the round on a demo-day page is general solicitation. Sending a mass email to a purchased list is general solicitation. Once you have done any of these things, every investor in the round needs 506(c)-level verification, not a bare questionnaire. If your fundraise has been quiet — one-to-one intros only — you can rely on 506(b) and the questionnaire's written representation. If it has been public, you cannot. Decide which regime you are in at the beginning, not the end.

Sending the questionnaire after the wire. The point of the form is to establish accreditation before the sale. Accepting funds and then chasing signatures reverses the burden and creates a period during which you have received unregistered securities proceeds from a person whose status you have not verified. Send the questionnaire with the SAFE or the subscription agreement, and countersign nothing until both come back.

Accepting checked boxes with no supporting representations. The all-equity-owners-accredited box requires a list. The trust box requires grantor identification. The Non-U.S. Person box requires every sub-clause. A form returned with only the top-level box checked is incomplete, and a diligence team will treat it as a defect.

Letting investors edit the form. Investors — especially sophisticated ones with counsel — will sometimes strike language, add carve-outs, or rewrite representations. Any change turns the form into a negotiated document, and your counsel now has to review each modification against the exemption you are relying on. Push back. The questionnaire is one of the few documents in a private financing where consistency across every investor is itself a legal virtue.

Reusing an outdated template. The accredited-investor definition has been amended several times in the last decade — most recently to add the professional-certification categories, the family-office category, and the "knowledgeable employee" category for private funds. A template from 2015 will miss all of these. Ask counsel to send the current version at the start of every round, and do not copy last round's file.

Storing the forms informally. These documents belong in the same secure repository as your executed SAFEs, board consents, and stock certificates. They will be requested in every future financing diligence, in every acquisition, and in any SEC inquiry. A form you cannot produce is a form you did not have.

Your outside counsel will read every returned questionnaire for four things: is the correct category checked, is the investor's legal name and capacity consistent with the wire and the security, are the supporting representations complete, and is the form dated on or before the date of sale. Any deficiency triggers a re-signature, and unresolved deficiencies get flagged in the closing memorandum.

A future acquirer's diligence team will do the same review, at scale, across every investor of record. They are looking for exemption breaks. A single unaccredited investor in a Regulation D round is a rescission exposure the acquirer will price into the deal or require you to indemnify. Ten missing forms across your history become a schedule to the purchase agreement.

The SEC staff, if they ever look, is checking whether the offering as a whole fit the exemption you claimed on the Form D. They compare your Form D filings against the questionnaires in your file. Discrepancies — an investor you claimed as accredited whose form shows no basis, an offering size that does not match the aggregate subscriptions — are what turn a routine inquiry into an enforcement matter.

The through-line is that the questionnaire is the primary evidence you will ever offer that your private financing was actually private. Treat it that way. Send the current version. Read every returned form the day it arrives. Reconcile every subscription against every wire. Store everything centrally. And the next time an investor says "just send me the SAFE, we can do the paperwork later," send the paperwork with the SAFE.

The questionnaire looks like a formality because it is short. It is not a formality. It is the document that determines whether your round is legal, whether your cap table is clean, whether your next investor will need to fund an indemnity escrow, and whether your acquirer will close on time. Every other document in a private financing describes the deal. This one describes the person on the other side of it — and the securities laws care more about who the buyer is than they care about almost anything else.

Get it right the first time, every time, on the same standard form, signed before the wire arrives, stored in the same folder as the SAFE it accompanies. That is the entire discipline. Founders who build it into their closing process do not think about the accredited-investor questionnaire again. Founders who do not spend the next round explaining it to counsel.

Before your next closing, run every returned questionnaire through this list. It takes two minutes per form and prevents the failure modes above.

The current version of the template was used, not a copy from a prior round.

The investor's legal name matches the name on the SAFE, the wire, and the cap-table entry — including exact capitalization, middle initials, and entity suffixes like "LLC" or "Ltd."

The signing capacity is stated ("in my individual capacity," "as trustee," "as managing member") and matches the entity type checked in Section 1.

Exactly one accreditation category is checked, and the supporting representations for that category are filled in — no blank grantor line under the revocable-trust box, no blank equity-owner list under the all-owners-accredited box.

For non-U.S. investors, every sub-clause of Section 2 is affirmed, and the transfer-restriction covenant is not struck.

The subscription amount on the form matches the amount on the SAFE and the amount actually wired.

The form is dated on or before the date of sale, and the date is not blank.

The form is stored in your closing folder under a filename that includes the investor's name and the closing date.

If any line in that list fails, resolve it before you countersign. This is the single highest-leverage twenty minutes of your closing week — cheaper than a rescission, faster than a diligence remediation, and the only version of this work anyone will ever thank you for doing.