Investing in Private Equity

A self-directed retirement plan can invest in most types of private offerings, including c-corps, LLCs, LPs, hedge funds, and more. When investing in private equity with a retirement account, the dividends from investments are paid directly to the retirement account and are either tax-deferred (traditional IRAs) or tax-free (Roth IRAs).

Investing in private equity within an IRA account has been available since 1974. However, the vast majority of investors are not aware of this option because traditional retirement account custodians limit investments to Wall Street stocks, bonds, and mutual funds. Midland IRA allows self-directed account investors the freedom to choose alternative assets, such as real estate and private equity investments, to build income.

Typically, these options are reserved to accredited and institutional investors who are proven to be financially fit enough to invest large amounts of funds over a long period of time without sustaining a substantial hardship if the asset proves to be fruitless. Funds are raised for things like investing in startup businesses, developing technology, gaining capital to improve the viability of an existing entity, and even to acquire an existing business.

Accredited investors are able to use their self-directed IRAs and other retirement plans to use these assets to build tax-sheltered income in their accounts. Midland IRA works closely with clients investing in private equity to facilitate the purchase(s) in compliance with current rules and regulations. Our ability to do this maintains the account’s tax-advantaged status and enables our clients the precious time to identify holdings they believe will increase their potential of building retirement wealth.

If you’re looking to take advantage of investing in private equity using funds from your IRA, call our team of IRA specialists today!

FAQs on Investing in Private Equity

What is private equity?

Private equity is a piece of a business in the form of stock, venture capital or a pooled investment vehicle like an LLC, LP or hedge fund. Each deal is different and you should discuss the pros and cons with your investment or tax advisor.

Why would I invest in private equity with my IRA?

When investing in private equity with a retirement account, dividends or gains from investments are paid directly to the retirement account and are either tax-deferred (traditional IRAs) or tax-free (Roth IRAs).

How do I invest in a private equity deal with my IRA?

A self-directed retirement plan can invest in most types of private offerings, including C-Corps, LLCs and Limited Partnerships. The most important thing to remember is that the investment must be titled in the name of your IRA, not you personally, so your account must be set up prior to purchasing or investing in any private equity.

Are there any types of entities that are not allowed to be held in an IRA?

A client cannot invest in an S-Corp within their IRA. If an IRA were to invest in an S-Corp, the corporation would lose its status.

If a group of my friends want to invest in the same deal, is there an easy way to do that?

Yes. For certain types of investments, we use Midland OnePath. Just let us know who to contact at the organization offering the deal. We’ll reach out and get the investment set up on OnePath, and then each investor sets up their account using a vanity URL, reducing paperwork and saving investors time.

Who completes the Investor Questionnaire?

The IRA holder will complete the investor questionnaire related to their personal finances. They will also sign anywhere it asks for an investor’s signature.

What is Midland’s role after funding the investment?

Midland will send and receive any funds between the IRA and the investment and Midland will request a Fair Market Value update annually and update the account according to the value provided by the manager.