What to Know About Holding a Private Company in a Self-Directed IRA

Some investors see a private company on the rise and think: If only I could get in early. Others know a local business owner who needs capital and think: That could be a solid investment. But few people realize they can use retirement funds to do exactly that, without relying on the stock market or giving up tax advantages. With a Self-Directed IRA, you can invest in privately held companies just as easily as you’d invest in stocks or real estate. And for those with experience in business, startups, or niche industries, it’s a way to tap into your expertise while still building wealth for retirement.

Investing in What You Know

One of the biggest benefits of a Self-Directed IRA is choice. Instead of being boxed in by mutual funds or market indexes, you get to decide where your money goes. For investors who understand small businesses or early-stage ventures, that often means looking at privately held companies.

Maybe it’s a startup you’ve followed since its first product launch. Maybe it’s a local manufacturing firm with a reliable track record. Or maybe it’s a company in an industry you’ve worked in for years. These aren’t options you’ll find through a brokerage platform—but they’re absolutely possible with a Self-Directed IRA.

Your IRA can purchase shares in a private C corporation, become a member in an LLC, or participate in a limited partnership. The return can come in the form of dividends, profit distributions, or an eventual sale. And if the business grows, your IRA grows right alongside it—tax-deferred or tax-free, depending on your account type.

Avoiding the Traps of Self-Dealing

This kind of investing comes with unique freedom, yes. But it also comes with strict boundaries. And it’s essential to understand them before you dive in.

The IRS doesn’t allow your IRA to transact with disqualified persons. That includes you, your spouse, your parents, your children, and a few others. So if your cousin runs a business and wants your IRA to invest, that might be okay. If your son wants the same deal, it’s not. These rules aren’t flexible, and breaking them can disqualify your entire account.

You also can’t play an active role in the business. You can’t work there, draw a salary, offer consulting, or even sign checks. The IRA owns the investment—not you—and that separation has to stay crystal clear. Even if you have the skills to help, lending them to a business your IRA owns can cross the line into self-dealing.

That said, you can research the company. You can review financials, ask questions, and make an informed decision as a passive investor. And that’s exactly what you should do. Private companies can be less transparent than public ones, so careful due diligence is going to be really important.

A Path for the Hands-On Strategist

Private company investments aren’t for everyone. They can be illiquid, and they often require patience. But for the right investor, they offer a level of involvement, insight, and alignment that traditional assets simply can’t match.

You’re not just hoping a stock goes up because the market says so. You’re choosing a company whose strategy you understand and whose potential you believe in. That kind of investing can be both personally and financially rewarding—especially when done inside a Self-Directed IRA. If you're curious about how to add private equity to your retirement strategy, we’re here to walk you through the process. Give New Vision Trust a call at 866-7500-IRA. We’ll help you understand the rules, avoid the pitfalls, and make the most of your options.