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Investor Insights Blog|Investing in Private Entities with an IRA: How it Works

Private Equity and Entity Investing

Investing in Private Entities with an IRA: How it Works

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Many investors think they’re limited to stocks, bonds, and mutual funds when it comes to saving for retirement. However, you have the freedom to invest in private equity, private entities, LLCs, private placements, hedge funds, venture capital, startups, offshore funds, and more – with a self-directed IRA.

Given the volatility of the stock market, investors seeking diversification from the public markets may find a self-directed account to be beneficial. Investments grow in a tax-deferred or tax-free environment and you have the ability to choose exactly what you invest in, putting you in control of your future wealth.

Here’s how it works.

How to Invest in Private Equity with a Self-Directed IRA

To get started, open and fund your Equity Trust account. You can do this online through myEQUITY, or by contacting us to have an IRA Counselor walk you through the process.

Next, you’ll identify your investment opportunity in a private entity such as an LLC, LP, or C-Corp. It’s important that you perform due diligence on your potential investments before making any decisions.

These are the steps to completing a private equity or private entity investment using your account:

Step 1: Request Funds and Direct Your Investment

  • Visit myEQUITY.com and navigate to Investment → Private Equity to begin the step-by-step Private Equity Wizard.
  • Upload supporting documentation for LLC, LP or C-Corp.
  • Sign documentation (eSignature is available) and ensure proper titling before sending. The correct titling is: Equity Trust Company Custodian FBO [Account name IRA, Roth IRA, etc.]

Step 2: Equity Trust Liaison Processes Your Investment Direction

  • A Private Equity Liaison will be assigned and will review the details of your investment direction.
  • Your liaison will contact you if there are any additional details required to fund your investment.

Step 3: Equity Trust Remits Money as Directed

  • After your request is processed, Equity Trust will disburse the funds to the payee based on your instructions.
  • If you’re issued a stock certificate, mail the originals to Equity Trust for safekeeping.

Your IRA now owns the asset.

[Related: Private Entity/Equity Investing with an IRA FAQ]

What’s next?

The final step is acting on your exit strategy.

Some examples of exit strategies could be selling the investment, taking a distribution, or passing the account to a beneficiary.

Watch this video for more on how Private Entity Investing Works in a Self-Directed IRA:

1

Can my IRA invest in a newly formed entity that will invest in real estate?

Yes. Investments in newly formed private entities, such as limited partnerships, limited liability companies, C corporations or land trusts, are permissible under the Internal Revenue Code, with the exceptions of subchapter S corporations.

2

Can my IRA purchase an interest in a subchapter S corporation?

No. IRAs are not qualified as investors in subchapter S corporations.


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