For your convenience, we offer e-bill express if you would like to make a payment online. Thank you.

Forge Trust 3rd Quarter statements are now available online.

Forge Trust

For your convenience, we offer e-bill express if you would like to make a payment online. Thank you.

Forge Trust 3rd Quarter statements are now available online.

For your convenience, we offer e-bill express if you would like to make a payment online. Thank you.

Forge Trust 3rd Quarter statements are now available online.

Private Equity IRA

An attractive asset for accredited investors

Private equity refers to an investment in a private company – a company not currently listed on a publicly traded financial exchange. Accredited investors can choose to use IRA funds to invest in private equity as part of a long-term investment strategy. Your IRA can acquire private equity either through a fund or direct investment in a private company.

Funds for investing in private equity may include private equity funds, venture capital funds and funds of funds.

Startups and growing companies may offer shares of stock directly 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.

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.

Private placements

In a private placement an issuer sells private equity or debt to a select group of private investors. Examples of private placement opportunities include private stock, warrants, bonds or membership/partnership interests offered by a privately held company usually to raise additional operating capital. These investments offer the potential for higher returns but with greater risk.

Types of private placements

Individual Retirement accounts may be used to invest in several different types of private placements. Forge Trust handles everything from small enterprise to billion dollar private equity investments.

Private placement investments include:

  • Start-ups
  • Hedge Funds
  • Offshore Funds
  • Fund of Funds
  • Limited Liability Companies (LLC)
  • Limited Partnerships (LP)
  • Private Equity
  • Equity Crowdfunding
  • Real estate investment trusts (REITS)
  • Exchange Traded Funds (ETFs)
  • Convertible Notes

When considering private placements as a potential IRA investment, keep the prohibited transaction rules in mind. If you or a disqualified person owns 50% or more of a privately held company, investing may be considered a prohibited transaction.

Before you invest, it is important to obtain all the information that you need to make an informed investment decision.

Investors should closely review all investment-related documentation including the entity’s operating agreement, private placement memorandum and subscription agreement to better understand the terms, conditions and possible future financial commitments associated with this type of investment.

What’s Prohibited?

An IRA account owner MAY NOT use IRA funds to invest directly in a private company if the account holder is:

  • An owner with 50 percent or more interest
  • An officer or director of the company
  • A highly compensated employee
  • An owner of 10 percent or more of company stock

The IRA account 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.

Learn more about prohibited transactions.

Private placements and regulation

Private Placements have additional filing and suitability requirements under FINRA and SEC Regulation D rules.

This is to ensure an investment offering is in compliance with securities laws and that certain individual investor requirements are met. Most private placement investments are limited to accredited and institutional investors. You are considered an accredited investor if you alone have a net worth of at least $1 million (not including your private residence) or you have earned annual income of at least $200,000 for the last two years. For couples, the annual combined income minimum is $300,000.

Consider Tax Triggers

Private placement investments may trigger Unrelated Business Income Tax (UBIT) on Unrelated Business Taxable Income (UBTI) that may be generated by the investment.

For example, if an investment is structured as a pass-through entity (LP or LLC) and the entity produces and sells goods or provides services, the IRAs' share of the net income will be considered UBTI and the IRA is required to pay income tax (UBIT) at current trust tax rates.

A review of IRS Publication 598 with your tax accountant will be worthwhile to completely understand the potential tax implications.

What’s Prohibited?

An IRA account owner MAY NOT use IRA funds to invest directly in a private company if the account holder is:

  • An owner with 50 percent or more interest
  • An officer or director of the company
  • A highly compensated employee
  • An owner of 10 percent or more of company stock

The IRA account 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.

Learn more about prohibited transactions.

Consider Tax Triggers

Private placement investments may trigger Unrelated Business Income Tax (UBIT) on Unrelated Business Taxable Income (UBTI) that may be generated by the investment.

For example, if an investment is structured as a pass-through entity (LP or LLC) and the entity produces and sells goods or provides services, the IRAs' share of the net income will be considered UBTI and the IRA is required to pay income tax (UBIT) at current trust tax rates.

A review of IRS Publication 598 with your tax accountant will be worthwhile to completely understand the potential tax implications.

When you invest in private equity through your IRA remember:

  • The IRA owns the private stock.

    This includes all the rights and responsibilities.

  • A redistribution of authority may help investors avoid prohibited transactions.

    Self-dealing prohibited transactions can be avoided by establishing boards or committees of non-disqualified persons.

  • The IRA may qualify as an accredited investor.

    Regulation D investments are sometimes only available to accredited investors, as established in accordance with the US Securities and Exchange Commission. If you qualify as an accredited investor, your IRA may qualify too.

Investment Document Requirements

When you are ready to make your investment purchase there are certain investment supporting documents which you are required to submit. It's important that all documentation is received simultaneously by us along with your investment authorization so as not to cause any delay in processing. Please pre-review investment document requirements here.

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