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Private Equity and Entity Investing
With a self-directed IRA, your investment options are not limited to publicly traded companies in the stock market. You have the ability to invest in private assets, such as private equity, private placements, or private entities, in a tax-advantaged environment.
The concept of using a self-directed IRA is new for some people, which is why we’ve compiled a list of the most common questions we hear from investors about investing in private equity or entities with their account.
Some important rules to remember about investing in an entity within a retirement account:
Types of entities include:
A limited business organized by one or more individuals, called general partners, who manage the business and are liable for the debts of the business. Limited partners are investors in the business and are only liable up to the extent of their investment. An IRA may only make investments in an LP as a limited partner.
Limited Liability Company (LLC)
A business that is formed by members (which may include individuals, corporations, other LLCs, and foreign entities) who have limited liability for the entity’s debts and obligations.
A company owned by shareholders who elect a board of directors. The board of directors determines the direction of the company.
It is ideal to have your Equity Trust account open and funded before you find your investment. Once you’ve identified your investment opportunity in a private entity such as an LLC, LP, or C-Corp, these are the steps to completing an investment using your account:
Step 1: Request Funds and Direct Your Investment
Step 2: Equity Trust Liaison Processes Your Investment Direction
Step 3: Equity Trust Remits Money as Directed
The Private Equity Direction of Investment (DOI) Form outlines the information that is needed about the investment including:
Entity investments also require supporting documents that provide additional details about the entity.
Video: Investing in Private Placements with an IRA
Private equity investments in good order are typically processed within five to seven business days of receipt. Expedited processing is available for an additional fee. Based on how you select to send the funds, there may be an additional seven to 10 business days for delivery.
It is critical to accurately complete your investment paperwork; if your paperwork is incomplete or inaccurate, your request will require extra processing time.
Entity investments may require additional review; please be aware there may be more information requested regarding your investment and could extend processing times.
Note: Some purchase requests require a verbal verification from the account holder prior to processing of the payment. Failure to complete the verbal verification will result in processing delays, including the cancellation of the request.
In the instance the asset goes public, you will be required to complete a replacement that would remove the original private asset and add the public asset into your account. This would also apply to a merger or acquisition situation.
To complete the replacement, provide a Publicly Offered Buy DOI that includes the specific details of the new asset within the Exchange section of this form. This can be done in myEQUITY.
Additionally, any required documentation from the investment company that will need to be signed by Equity Trust, as well as documentation to support the replacement taking place, will need to be submitted. Delivery instructions should be directed to the investment company.
If the asset is a stock that is restricted, Equity Trust Company cannot remove the restrictions and you must work with the company that originally issued the stock.
If you’re investing your account in a Land Trust, Personal Property Trust, or Joint Venture, you’ll need to complete a General Purchase Direction of Investment. In myEQUITY, navigate to Investment → Other Investments and choose “General Purchase.”
Can my IRA purchase real estate that my corporation, partnership or LLC owns?
Can my IRA purchase an interest in a subchapter S corporation?
You are leaving trustetc.com to enter the ETC Brokerage Services (Member FINRA/SIPC) website (etcbrokerage.com), the registered broker-dealer affiliate of Equity Trust Company. ETC Brokerage Services provides access to brokerage and investment products which ARE NOT FDIC insured. ETC Brokerage does not provide investment advice or recommendations as to any investment. All investments are selected and made solely by self-directed account owners.Continue