Investing in Private Equity with a Self-Directed IRA

Startups and growing companies may offer shares of stock through private markets to raise capital for company growth or expansion. Additionally, employees of private companies may wish to sell their private shares to meet personal liquidity needs.

IRAs may take advantage of these private stock investment opportunities as long as prohibited transaction rules are followed.

An IRA account owner MAY NOT use his or her IRA funds to invest in a private company whereby the individual:

• is an owner with 50 percent or more interest
• is an officer or director of the company
• is a highly compensated employee
• owns 10 percent or more of company stock

The IRA owner is also prohibited from purchasing private stock from a direct family member (ascending or descending lineage) or a fiduciary or service provider to the IRA.

It is important to reiterate that private company stock is not liquid and should be considered part of the IRA account owner’s long-term investment strategy.

As with any security, the IRA investor should perform due diligence on the company; its business, its management and current company valuations before directing an IRA investment.

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