Self Directed IRA Possibilities With A Small Business
Anyone who has a small business in operation has probably given some thought to invest additional funds into it at some time or another. One of the sources of funding that has proven to be popular in recent years is a simple IRA as managed by a financial institution.
As many financial advisers will tell you, there are many ways by which you could set up a business inside an IRA. Nevertheless there are certain rules and restrictions that will apply, which you would do well to be aware of before making any important decisions.
Keep in mind that the stock of an S corp cannot be held by a self-directed IRA, although it is possible for a self-directed IRA to grant a loan to an S corp. However, if the loan in question is to be made to an S corp or any other business entity wherein you or a "disqualified person" as defined by IRS regulations' own 50 percent or more in, this would constitute a prohibited transaction.
The penalty for such transactions can be quite severe and the IRS would probably consider the IRA fully distributed and therefore impose taxes on the full value of the IRA.
One way that you can circumvent this potential problem is by having the self-directed IRA make out a loan to a person that you trust, who will then make the loan to your S corp. keep in mind that this person should not fit into the category of disqualified person as defined by the IRS. This restriction includes but is not limited to spouses, ancestors, lineal descendants and spouses of lineal descendants.
While the above workaround is proven to work under certain circumstances, keep in mind that there is a fair amount of risk involved as well. If the transaction is handled improperly for example, or if the transaction could be construed as involving indirect benefits or conflicts of interest, it could well be deemed a prohibited transaction by the authorities, whether or not the person that applied for the loan was a disqualified person.
Another other option that is available to you then if you want to establish a business inside an IRA is to apply for an exemption that will allow your self-directed IRA to make loans to your S corp. This is something that not too many advisors know about, but there is in fact a provision existent in the Internal Revenue Code that gives the Secretary of Labor the authority to grant exemptions to certain prohibited transactions.
In any case, you would do well to seek out the advice and assistance of a professional tax or financial advisor who is thoroughly knowledgeable with the various aspects of this plan. Keep in mind that with a self directed IRA, the time that it will take to set up a business depends on the particular financial institution or brokerage firm.
In some cases, the entire process of setting up a self-directed IRA and having the funds moved from the old account into the new one can take anywhere from 4 to 6 weeks.
Related Tags: business investing, ira, self directed ira, business retirement plans
For more information about setting up a self directed IRA and successful investing visit our site to learn about our unique program.
Your Article Search Directory : Find in ArticlesRecent articles in this category:
- The Secrets to Getting Low Down Payment Car Insurance
Upon purchase of a new car, there is almost always a requirement to buy an auto insurance policy as - The Wisdom Behind Auto Insurance Comparison Quotes
No one in his right mind would not go for a good deal. In fact, everyone is out on their feet and ru - The Benefits of Auto Insurance Comparisons Florida
Insurance can be expensive. This is something everyone knows about especially in the sunny state of - Auto Insurance Florida: The No-Fault Policy
There are different kinds of car insurance offered by a wide range of providers today. Different sta - Finding the Cheapest Auto Insurance Companies
Everyone is asking and searching for the cheapest auto insurance companies available today. Consider - How do You Compare Private Health Insurance Cover in Australia?
Deciding what is the best and most affordable private health insurance cover can be easy if you take - How Payment Protection Insurance Was Mis-Sold
For over six years the issue of Payment Protection Insurance (PPI) and how it was mis-sold to custom - Finding Quotes For Auto Insurance Online
One of the many concerns when you are shopping for auto insurance is being able to get access to quo - How You Can Find the Best Auto Insurance Online
When it comes to renewing your car insurance you are going to quickly discover that there are a numb - Guidelines For Searching For Auto Insurance Online
The internet can be a great source of discounts and values related to auto insurance. However, many
Most viewed articles in this category:
- Trading Forex With Pivot Points
Forex Pivot Point Trading are used today by Forex Traders and are calculated on the previous days mo - Where To Search For Free Grants
Where do you look for free grants? The search must be thorough or it could be an exercise in futilit - The Connection Between High Blood Pressure and Salt
We are a society of Salt Addicts. It cannot be denied. When you look at the things we do and the pla - Tips For Avoiding HYIP Scams
Before knowing about HYIP Scams, refer to the functioning of HYIP or "High Yield Investment Programs - Getting Credit After Bankruptcy
Consumers do not have to live sans credit following a bankruptcy. By following certain steps consume - Tips For Choosing A Credit Card
Are you looking for that perfect credit card? If so, you may be confused about what exactly to look - Cheap Car Insurance For Teens Online
Many elements determine a car insurance policy. Car insurance companies look at the person's age, hi - What Exactly Is Free Grant Money?
You can apply for free grant money from various government agencies. But where exactly does this mon - Small Business Owners Marketing and Customer Service
Marketing can be time-consuming, but it doesn't have to be hugely expensive now, thanks to the Inter - Apply Online For A Credit Card - How To Choose A Card?
The best type of credit card for you will be dependant on how you intend to use the credit card. Are