Private Placements IRA Rules

Private Placement IRAs are another version of a self directed IRA that allows you to make non-traditional investment decisions when it comes to your IRA. Private placement IRAs offer you greater flexibility in your investment options, which give you a greater range of opportunities to increase the value of your IRA in order to secure your financial future.

With a private placement IRA, you can invest in things like privately owned companies that do not offer stock on the open market to the public. These include LLC companies, C corporations, LLPs or limited liability partnerships, pooled investment funds, investment funds, REITs and so much more. As a private placement IRA accountholder, you can take advantage investment opportunities that everyday retirement accountholders cannot. This flexibility makes it possible to better diversify for your portfolio and increase the value of your account much more quickly than with traditional retirement savings options such as traditional or Roth IRAs.

There are a few things you should be mindful of when considering a private placement IRA. For example, privately held companies are not required to provide disclosure documents like companies registered with the SEC. This means that investing in them is quite a bit riskier than investing in public companies because their financial statements don’t have to be audited by a professional auditing firm. It is important to do your due diligence before investing in any firm. Some investments impose limits on when the money can be withdrawn, which may impact your ability to get the money you invested back. If you are close to retiring, this may not be the right choice for your needs. What’s more is that these limitations may actually cost you money in IRS penalties if you are unable to take your required distributions due to withdrawal limitations.

Here are some additional rules you might want to be aware of. For example, private placement IRAs are usually available to investors only. This means that you have to meet eligibility requirements such as having an income and meeting net worth requirements.

There are also special IRS rules for dealing with different investment types. For example, if you are a silent investor, meaning that you do not have no active management duties in the private placement, you may still have to file a 990-T form, depending on whether or not the income you receive from your investment exceeds $1,000 and whether or not the income is considered passive income or not. The IRS has specific rules about what is considered taxable income and what is not.

And there are also transactions that are prohibited under a private placement IRA. These include selling or leasing property, lending money or extending credit as well as selling goods or services to someone classified as a prohibited person.

Of course, these are not all of the rules associated with a private placement IRA. To find out more about what benefits a private placement IRA can provide as well as exploring other options for your retirement savings needs, please call us today.