Using an IRA to invest in a privately held company?

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Hell_Is_Like_Newark

Kingfisher
Gold Member
Has anyone here done this? If so, was it difficult to setup?

From what I have read so far, you are allowed to do this, but with a number of caveats and restrictions via the IRA. The firm that manages my IRA may not allow this as a matter of policy, which means I would have to move IRA money to another account. The IRS restrictions are a bit arcane from my first read through.

I have a project that I have been working on for the past 2-1/2 years that may (fingers crossed) have an angel investor(s) putting in a investment. I want to get a piece of it as well, beyond what I have earned putting labor wise. The majority of my non-real estate investments are in tax deferred accounts.
 
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paninaro

Pelican
If you manage to find an IRA custodian willing to handle all the paperwork, they're going to charge a hefty fee that will likely be higher than the tax benefit. On top of that, what happens to your IRA when the company you're investing in gets sold, but you're too young to take penalty-free IRA distributions?

Just invest directly. Most startups don't pay dividends, so your only taxable event is if your interest gets acquired, and you can plan for that.
 
Hypno

Hypno

Crow
If the company in which you invest is sold that’s a good thing. The cash ends up back in your IRA. You can then reinvest in a public company or a private company. By holding your original investment in the IRA you have avoided (deferred) a capital gains tax.
 
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