IRA used to fund private business

Submitted by Robert Witt on Tue, 2016-08-30 14:38

My client is interested in using part of his IRA to fund his share of a purchase of a business. This transaction represents 5% of the value of the business – the other 95% would be funded through private equity.

I have found little information that is valuable on the advantages and disadvantages of doing so – any direction would be appreciated.



Submitted by Bruce Steiner on Tue, 2016-08-30 14:57

  • An advantage is that it avoids tying up his non-IRA assets in an illiquid investment.  He may not mind the illiquidity in his IRA if he doesn’t expect to need the IRA assets for a long time.
  • Possible disadvantages are (i) the need to value the investment each year, (ii) illiquidity when he needs to begin taking required distributions, and (iii) the prohibited transaction rules if they might apply.

Add new comment

Log in or register to post comments