Self-Directed IRA Investments in Private Placements & LLCs

Investing in privately held entities.

Free Guide Private Placements in IRAs


Investment Freedom With Self-Directed IRAs

When you invest in private placements through a self-directed IRA, it may be a win-win situation— The business owner gains access to needed capital and you gain the potential to reap a higher return on your investment. You also gain the benefit of diversifying your retirement portfolio.

About Private Placements in Self-Directed IRAs

Private placements—also called private stock or private equity—offer the opportunity to invest in privately held entities that are not sold in the open, public market. They often involve limited partnerships (LP), limited liability companies (LLC), and similar entities. These investments are offered to a small audience of investors.

These types of investments are not registered with the Securities and Exchange Commission.They typically are offered by privately held companies, partnerships, and small businesses—entities that often look to individuals, not banks, to raise the development capital needed to grow their businesses.

Your self directed IRA can invest in private placements, such as:

  • Limited Liability Companies (LLC)
  • C corporations
  • Limited Partnerships (LP)
  • Pooled investment funds
  • Hedge funds
  • Start-ups
  • Small businesses
  • Equity crowdfunding
  • REITs
  • Convertible notes
  • Land trusts

Download the Guide to learn more about the rules and how it works.

How Do I Invest in Private Placements With a Self-Directed IRA?

The process is simple once you have established and funded your self-directed IRA. Here's what you have to do to get started:

  1. Open an account with IRA Resources.
  2. Fund the account with a contribution, fund transfer, or a rollover from another account
  3. Do your due diligence on the proposed investment
  4. Download the Private Placement Buy Direction Letter to have IRA Resources purchase the investment on behalf of your account

We always recommend that you open and fund your self-directed IRA right away so that your deal is not delayed. Transferring IRA funds from one custodian to another can sometimes take time. Download the free Transfer-Rollover Guide to plan ahead.

Transfer-Rollover Guide

Conducting Due Diligence

Private placements are offered without some of the protections—such as disclosure requirements—that apply to investments that are registered with the SEC. This makes it even more important that you pay attention to the details and to talk with a qualified legal or investment advisor.

Before lending money or investing in a business, do your due diligence. A successful investor is an informed investor. Here are few things to look out for:

  • Ask if the investments puts limits on how long investors have to wait before they can sell or withdraw their funds. If you are close to retirement, make sure that this will not interfere with taking your required minimum distributions to avoid penalties.
  • Find out if earnings from the entity are taxable to the IRA, even if they are not paid out.
  • Find out if your state considers LLCs to be securities; in this case the entity will have to meet the standards of securities offerings.

It's always important to know who you are doing business with. A basic internet search can reveal if you are dealing with a bad actor.

Private Placement IRA FAQs

What is a private placement? 

Private placements provide an opportunity to invest in privately held entities that are not sold in the open market. These types of investments are not registered with the SEC. They often involve limited liability companies (LLCs) and similar entities to do this. Self-directed IRAs can invest in private placements.

Can an IRA be a member of an LLC? 

Yes. An IRA can participate in a single member LLC or a multi-member LLC. Keep in mind that prohibited transactions still apply. 

What is a self-directed IRA LLC? 

A  self-directed IRA LLC refers to an LLC that is funded with retirement savings for the purpose of investing for retirement— a strategy real estate investors use to have complete checkbook control. The IRA can be the sole member of the LLC or it can participate in a multi-member LLC. 

How do I invest in private placements with a self-directed IRA? 

To invest in a private placement with retirement funds you must establish a self-directed IRA. First, Open an account at IRAR. Next, fund the account with a transfer or rollover from another account. Then, instruct IRAR to make the investment on behalf of your IRA. If you are establishing an IRA LLC to invest in the private placement, the LLC must be established and funded with IRA funds. 

How to Do a Private Placement With a Self-Directed IRA: Questions & Answers

Download the Free Guide