Kim wants to invest in Beta Company’s crowdfunding equity fund. In the current 12-month period, Kim has invested $25,000 in other equity funds registered under Regulation Crowdfunding. Her annual income is $900,000, and her net worth is $1,500,000. How much can she invest in Beta’s crowdfunding equity fund?
Business · High School · Tue Nov 03 2020
Answered on
Under Regulation Crowdfunding, there are specific investment limits based on an individual's income and net worth. For an individual with an annual income of $900,000 and a net worth of $1,500,000, the investment limit in crowdfunding equity offerings is calculated as the greater of:
5% of the lesser of the investor's annual income or net worth.
If the investor's annual income and net worth are both equal to or more than $107,000, then the limit is 10% of the lesser of the investor's annual income or net worth, capped at $107,000.
Let's calculate both scenarios:
5% of the lesser of annual income or net worth:
5% of $900,000 (income) = $45,000
5% of $1,500,000 (net worth) = $75,000
The lesser amount between these is $45,000.
If annual income and net worth are both over $107,000:
10% of $900,000 (income) = $90,000
10% of $1,500,000 (net worth) = $150,000
The lesser amount between these is $90,000.
Comparing the results from both scenarios, the maximum investment Kim can make in Beta Company's crowdfunding equity fund is $45,000 because it's the smaller amount calculated from the two scenarios based on the 5% limit.