How Investing in a Private Company in a Self-Directed IRA Works

How Investing in a Private Company in a Self-Directed IRA Works

When you invest with a Self-Directed IRA, one of the chief advantages is that you will have easy access to nontraditional retirement assets. One of the most popular of those nontraditional asset classes is that of a private company. You can invest in private stock that isn’t listed on the public stock market, giving you access to the potential for a large amount of growth without having to rely on the twists and turns of the stock market headlines. But how does this process actually work, and what will you need to know? Here are a few key facts about investing in a private company within a Self-Directed IRA.

How Investing in a Private Company Works When Using a Self-Directed IRA

You can check out our page on private company investing here at American IRA. However, let us go through some of the basic steps:

  • Open a Self-Directed IRA. It starts with having the infrastructure in place. When you work with a Self-Directed IRA administration firm like American IRA, you will have confidence that the steps you took are the best and simplest steps for getting started. You will be working with American IRA, for example, and American IRA would, in this scenario, function as the custodian of the account.
  • Know the private company in which you want to invest. Of course, you have to do your homework here—because you, after all, will be calling the shots. American IRA will not be making specific investment advice. Instead, our job as custodian is to facilitate the transactions that you want to take place.
  • Direct your Self-Directed IRA administration firm to make the purchase on your behalf. Once you’re sure what you want to purchase, the next step is to fill out a “buy direction” letter and direct the staff of your Self-Directed IRA administration firm to make the purchase on your behalf. Then, once you have signed the relevant documents, and note that they are then “read and approved,” American IRA will be able to purchase the shares as directed. It is that simple.

For many people, this sounds like an extra “layer” for making a purchase like this. But think about it this way: when you invest in the public stock market, you have to work through a broker. Simply being used to that arrangement makes it simpler. For that reason, we think that if more people are “used” to the Self-Directed IRA and working with a Self-Directed IRA administration firm, they will see just how simple this process can be for buying private company stock.

Why Private Companies?

We are not saying that you have to invest in private companies. But one thing we frequently note here at American IRA is that using a Self-Directed IRA means that you will have access to nontraditional retirement assets. For many people, the idea of buying private company stock is not that big of a leap. But holding this kind of stock within a retirement account may not be a concept they are too familiar with. The good news is that when you hold private stock within a Self-Directed IRA, you will have the tax protections of the IRA working for you! That is assuming that you stick to all of the retirement rules set forth by the IRS.

A well-timed investment in a private company can be a powerful way to build wealth. And with the tax protections that come with a Self-Directed IRA, this growth can be even more powerful. But it is important to know what you are getting into.

Interested in learning more about Self-Directed IRAs?  Contact American IRA, LLC at 866-7500-IRA (472) for a free consultation.  Download our free guides or visit us online at