You can’t allow this investor to purchase Interests in your company under a Rule 506(c) offering. The only way you can admit a financially non-accredited investor is if the investor becomes a member of your management team and is actively involved in generating their own profit. The accredited investor definition includes officers and directors who are active members of your management team, as well as key employees who are knowledgeable about the offering.
However, because this investor is investing with a self directed IRA, they are prohibited by IRS “self-dealing” rules from being actively involved in management of an asset in which their IRA has passively invested.
You could consider converting your offering to a Rule 506(b) Offering if you have not admitted any investors that you found through advertising (i.e., all current investors have been friends, family and acquaintances). Doing this would prohibit you from doing any further advertising. But, with a Rule 506(b) Offering, you can admit up to 35 non-accredited, but sophisticated investors with whom you have already established a pre-existing, substantive relationship. Please see the article referenced below to see what this entails: What’s a Substantive Relationship for Rule 506(b) Investors? https://syndicationattorneys.com/articles-stick-to-top/pre-existing-substantive-relationship/
Should You Really Start a Fund?
We get potential clients who reach out to us every week who want to start a fund. While we could simply take their money and set them up with fund offering documents, we actually talk a lot of people out of doing a fund. Why? Because they don’t have the necessary...