Private Equity / Entities

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

Self-Directed Entity Investing Rules to Know

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