Self-Directed IRA Private company investing tips

Self-Directed IRA Private Company Investing Tips

The Self-Directed IRA opens up all sorts of avenues for retirement investing—so what good is it if you don’t use those avenues once in a while? That’s why today, we’re highlighting a unique asset class: the private company. While many investors are familiar with what it’s like to invest in publicly listed companies on popular stock exchanges, a private company presents unique opportunities for growth and getting in on the proverbial ground floor. But what do you need t know about this style of investing, and what can you do to get started? Let’s cover some tips you can use to think about private company investing within a Self-Directed IRA:

Self-Directed IRA Private Company Investing Basics

First, let’s zoom out and double down on these definitions so you know exactly what you’re looking at. Simply put, investing in private companies through Self-Directed IRAs allows you to purchase stocks in companies that aren’t publicly traded. These companies may offer stock options or shares of ownership, commonly known as LLCs. This avenue isn’t just for the seasoned investor; anyone with a Self-Directed IRA can explore this style of investing.

Tip #1: Learn How to Use a Self-Directed IRA

Engaging in private company investments through your Self-Directed IRA is straightforward. You simply provide a buy direction letter to direct your IRA administrator, such as American IRA. Once you’ve reviewed and approved the necessary documents, American IRA executes the purchase on behalf of your IRA. All shares acquired are held in the name of your IRA, reflecting its ownership percentage. This is the key to using a Self-Directed IRA administration firm: you’ll understand that once you have a good one in your corner, the process of kicking off a private company investment is much easier than you anticipated.

Tip #2: Follow the Rules

While private company investing through Self-Directed IRAs offers all sorts of wonderful opportunities, you’ll want to stick to the rules:

  • Avoid Conflicts of Interest: You cannot invest in a private company that you or any prohibited person associated with your IRA owns, manages, or controls.
  • Income Distribution: Any income generated by your investment must be paid directly to your IRA in proportion to its ownership percentage.
  • Valuation Requirements: Companies must provide an annual Fair Market Valuation, which is crucial for maintaining compliance. This valuation should be submitted to your IRA administrator, ensuring full transparency and adherence to regulations.

Tip #3: Seek Professional Guidance

Before beginning with private company investing, consult professionals and conduct thorough due diligence on any potential investments you may have in mind now. Professionals such as attorneys, financial advisors, and CPAs can offer key insights. They may even help you out with guidance and advice suited to your specific goals as an investor.

As a neutral third-party administrator, American IRA facilitates these investments without making recommendations. We’re not going to tell you what to invest in. Instead, we prioritize providing the necessary support and infrastructure for investors to move with confidence. And that’s good news if you’re unsure where to start—because we can help kick off an account.

Yes, private company investing through Self-Directed IRAs presents an exciting opportunity to diversify your investment portfolio. By leveraging this approach, you can potentially access promising ventures and participate in the growth of innovative companies. But private company investing requires lots of due diligence and a willingness to understand the various regulations involved. Consulting professionals and staying informed can help you make informed decisions and maximize the potential of your Self-Directed IRA investments.

Interested in exploring private company investing through your Self-Directed IRA? Contact American IRA at 866-7500-IRA to learn more about how we can support your investment journey.

For more about Private Company Investing: Private Company Investing Within a Self-Directed IRA (