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With a self-directed account at Equity Trust, you can utilize a tax-advantaged account to invest in private equity also known as entities.
Private equity investments can include purchasing ownership in a start-up company, real estate development company, private LLCs, limited partnership, or other types of corporations.
Important rules to remember about investing in an entity within a qualified account include:
If you are purchasing ownership of an existing entity total ownership of disqualified individuals (including you) cannot be 50% or greater
Also, IRC 4975 prohibits investments where the managing member is more than 10% interest owner and also a disqualified individual
Your limited partnership or LLC may be subject to Unrelated Business Income Tax (UBIT)
UBIT is the tax on unrelated business income, which comes from an activity not related to the tax-exempt purpose of the organization. IRS Publication 598 provides instruction and details on how to determine if a normally tax exempt entity/organization is required to claim Unrelated Business Taxable Income
You should discuss UBIT situations with your CPA/tax advisor
You many not invest in stock of a subchapter “S” corporation
Any earnings from the entity must return to your qualified account
For the complete list of rules please visit IRS.gov
15-Minute Guide to Private Equity Investing
Expand and Diversify Your Investing with Confidence
