Question

Wendy wants to start a business. She knows many unaccredited investors who she knows will help her jumpstart her business. What constraints on investments for new businesses apply here?

Answer 1

Available Options are:

A. Investors' allowable investment depends on the accredited or non-accredited status.

B. Investors may invest a combined $50 million within a 12-month period.

C. Investors may invest no more than $1 million combined for the first year of the business.

Answer:

Option C. Investors may invest no more than $1 million combined for the first year of the business.

Explanation:

The non-accredited investors do not invest more than $1 million for first year. Furthermore, for Investor it also imposes investment in current business conditions which says that Investor can invest in its business with greater of:

1. $2000

2. Or the lesser of (If the net worth of Wendy is less than $100,000)

• 5% of its total income for the year
• Net worth

There is also an option which is available if the net worth of Investor exceeds above $100,000 then he can invest up to lesser of 10% of his income or net worth, otherwise he will have to follow the above conditions.

Here, it also has an upper limit, which means that the investor can not invest more than $100,000 in the subsequent year, whatever the level of net worth or income he had for the year.

This means the non-accredited investor can not invest more than $1 million.