Investing through a Self-Directed IRA is a great alternative strategy to diversifying your investment portfolio.  Through a self-directed IRA, you can invest in multiple investments, including real estate, physical gold and silver, private placements, loans, and other non-traditional investment vehicles.

One investment vehicle that could have a big payout is private placements. In short, a private placement is an ownership in a privately held business that is not traded on the stock exchange. Private placements can be LLC or corporations.
With a private placement, they do not have the normal disclosure laws that a publically traded company is required to report.  There are benefits and disadvantages to this.  The disadvantage is that you need to do your own homework on the company, as to ensure that the company is legit and that investing in the company will be a good move.  The advantage is that by doing your own homework and getting into an investment early, you can hit the jackpot on a good investment that can pay out in large dividends.

If you are interested in investing in a private placement you need to align yourself with an IRA custodian that will allow you to do this type of transaction. Most IRA custodians only allow you to invest in a publically traded stock. Our company allows you to take your IRA and put it in private placements investing.

Below are some other benefits of investing in a private placement:

• Allows for greater balance in your portfolio because of diversification in your IRA
• Control over the investment options, because you’re not bound by a custodian that only allows for stock and bonds
• If you have knowledge of a new startup company, you can get in early enough to make large profits
• Any growth or dividends grow tax-deferred or tax-free if you have a Roth IRA
• Your IRA is also able to diversify into Limited Liability Companies, Limited Liability Partnership, C-Corporations, and other non-traditional start-up companies

Below are some general rules to follow when investing in a startup company:

• Due to the tax nature of S Corps, your IRA cannot have any ownership in an S Corp. That’s because S Corps can only be owned by a natural person
• Your earnings could be subject to UBIT Tax (Unrelated Business Income Tax). For more information read What are UBIT and UDFI Taxes Associated with Self-Directed IRAs.
• You cannot invest in a private placement that you already own
• Ownership in the private placements needs to read as the following: NAME OF CUSTODIAN FBO___________clients name.  You cannot have the ownership read your name individually
• There can also be restrictions if you are employed by the company or are a manager for the company
• And lastly, all income or dividend payments must go back to the IRA, not to you personally

If you would like more information on private placements investing inside of an IRA, feel free to contact me or comment below.

Author: Ben Barker, Self-Directed IRA Professional
1.801.683.9291
ben@accuplan.net