Private Placements: 
Using a Self-Directed IRA for Private Placements

What is a Private Placement?

Investing in a private placement investment with a Self-Directed IRA is when an investor's retirement funds are placed into a privately held company such as an LLC, private equity fund, hedge fund, startup, or small business.

Private placements typically have a three-to-five-year holding period before an investor can cash out or liquidate their position. This holding period encourages the use of IRA funds (rather than personal funds) for private placement investing. While it is important to have real-time access to personal assets, retirement assets can be "locked up" for a period due to IRS-imposed inaccessibility. In most cases, the retirement funds may not be accessed until the retirement age of 59.5. But savvy investors understand that many private placement investments have a high risk/high reward ratio and would like to see any possible appreciation take place in a tax-advantaged account.

Private Placement Investment Considerations

Eligibility
Public companies are traded on the open market and are regulated by the Securities and Exchange Commission. Private Placements are not as highly regulated and generally require investors to be accredited because of the additional risk involved. 

Due Diligence
Before investing in a private placement, investors are encouraged to do their due diligence and consult with a financial professional to determine whether the investment is a good fit for their financial situation.

ENTITY PAPERWORK
Investment sponsors provide paperwork to their investors outlining the details of their offering. For LLCs, articles of organization and an operating agreement are provided. For funds (such as private equity funds or hedge funds), a private placement memorandum and subscription agreement are prepared by the investment sponsor. These documents outline the:

Nature of the investment

Company structure

Expected returns

Risk factors presented by the investment

Interested to learn whether your investment will work with a Self-Directed IRA? Contact us today!

Start A Conversion

How To Invest in a Private Placement with 
Self-Directed IRA Funds

Madison Trust has streamlined the investment process for a Self-Directed IRA, so private investments with your IRA money are easier than ever.

1

Create a 
Self-Directed IRA

To establish a Self-Directed IRA, contact a Self-Directed IRA custodian and complete the account application.

2

Transfer Funds Into The New Self-Directed IRA

Account holders may transfer funds from an existing IRA or roll over funds from a former employer’s plan, such as a 401(k) or 403(b).

3

Invest In The Asset Of Your Choice

Instruct your Self-Directed IRA custodian to invest your IRA funds into the private placement of your choice.

IRA ownership in a private placement is titled as follows: “Madison Trust Company Custodian FBO [your name] [Madison Trust account #]”.

The following documents, along with an Investment Authorization form, are required by Madison Trust Company for Self-Directed IRA private investments:

LLC Minority Interest:
  • Articles of Organization
  • Operating Agreement
  • Certificate of good standing
    (if entity exists for more than 12 months)
Fund:
  • Subscription Agreement
  • Private Placement Memorandum
How To Invest Your IRA into a Private Placement

Ready to start investing in your future?

Reach out to our team, and we’ll answer any questions you may have.
Corporate Headquarters:
Madison Trust Company
401 East 8th Street • Suite 200
Sioux Falls, SD 57103
Mailing Address:
Madison Administration Company
One Paragon Drive • Suite 275
Montvale, NJ 07645
Hours:
Monday - Thursday: 9:30AM - 5:30PM EST
Friday: 10:00AM - 4:00PM EST
Saturday/Sunday: Closed
Contact:
(800) 721-4900
[email protected]
F: 845-947-1212
magnifiermenuchevron-down