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Preferred investment vehicles for Private Company Investing
Posted on 6/4/15 at 6:14 am
Posted on 6/4/15 at 6:14 am
LLCs, Trusts, Personal/commercial accounts, etc. Can anyone share their personal experience on how they structured their private investments to limit tax consequences upon exits?
2
Posted on 6/4/15 at 4:36 pm to GregYoureMyBoyBlue
Use self directed iras to participate in tax free it tax deferred gains...its that easy
Posted on 6/4/15 at 4:41 pm to GregYoureMyBoyBlue
If you plan on keeping the money into retirement, self-directed IRAs generally work well.
Trusts are not very good for income tax purposes but are great for estate tax purposes and great for limiting the kids abilities to screw something up.
LLCs are good for liability protection if that's an issue.
If it's a large chunk of money, and you want to gift/leave it to others, look at a family LP
Trusts are not very good for income tax purposes but are great for estate tax purposes and great for limiting the kids abilities to screw something up.
LLCs are good for liability protection if that's an issue.
If it's a large chunk of money, and you want to gift/leave it to others, look at a family LP
Posted on 6/4/15 at 5:05 pm to LSUFanHouston
Thanks to you both 
Posted on 6/4/15 at 5:35 pm to GregYoureMyBoyBlue
I would have your self directed IRA own an LLC that owns a portion of the company.
Disclaimer: I'm not a lawyer, but I do see their work often.
ETA: The reason being that it gives you one additional level of seperation from any other assets in your self directed IRA. If it's the only thing in your IRA, then it doesn't matter much, but if you ever want to invest in another company through that IRA, it will come in handy.
Disclaimer: I'm not a lawyer, but I do see their work often.
ETA: The reason being that it gives you one additional level of seperation from any other assets in your self directed IRA. If it's the only thing in your IRA, then it doesn't matter much, but if you ever want to invest in another company through that IRA, it will come in handy.
This post was edited on 6/4/15 at 5:37 pm
Posted on 6/4/15 at 6:28 pm to TheHiddenFlask
POD should be added to all accounts per your attorney and will. Also need to consider estate taxes as the level is still relatively low on that. I think combined estate starts at $5MM. There are circumstances where a trust is beneficial. If you do that on real property, you'd proably want to add the trust as a named insured on both underlying liability coverage and whatever excess umbrella you might have.
Posted on 6/4/15 at 7:25 pm to player711
Just how much money do you think people have in their IRAs that private company investing is a real option? The opportunities available will be very limited unless you have substantial capital to invest. Would you really want to have an investment that generates long-term capital gains, currently taxable at 20%, be tax deferred when the owner's marginal tax rate will likely be higher when the IRA is making distributions?
The correct answer is dependent on the specific investment opportunities.
The correct answer is dependent on the specific investment opportunities.
Posted on 6/4/15 at 7:59 pm to Poodlebrain
Are you asking me? If so, I'm assuming he meets the definition of an accredited investor. Likely in an investment of this nature, if you had to take it as ordinary income, it would be expensed out before it got distributed, and if it was taxed out to be a gain, I'm not sure why some would not pay cap gains, and wait to pay ordinary income on it, but nothing surprises me on here.
I'd venture to guess most investments of this type, and I don't know exact statistics, would result in both ordinary income, and eventually some sort of gain.
But what would I know?
I'd venture to guess most investments of this type, and I don't know exact statistics, would result in both ordinary income, and eventually some sort of gain.
But what would I know?
This post was edited on 6/4/15 at 8:06 pm
Posted on 6/5/15 at 10:36 am to Iowa Golfer
quote:Not specifically, but I had to reply to someone, and your post happened to be the one I chose. My point was that there isn't a one size fits all answer to the OP's question. You need to look at every opportunity and decide what is the best form of ownership based on expected results for the investment. There are times when it is advantageous to materially participate in the business of private investment opportunities. Having such an investment in a self-directed IRA would eliminate the advantages of material participation.
Are you asking me?
Posted on 6/5/15 at 3:08 pm to Poodlebrain
My response was pretty generic and hardly spoke at all to forming an entity to invest in a private investment. POD. Overlooked by many. Might or might not be a big deal. By why chance it? Making sure you have liability extended to a trust, etc. Having a will.
Posted on 6/6/15 at 11:11 am to Iowa Golfer
My question was specifically concerning angel investing. After doing some more research on the different vehicles that everyone mentioned, I think the best solution is splitting the investments between an irrevocable trust and an LLC.
LLC to maintain flexibility even if the tax burden is higher. Also to reap some of the rewards of the investing prior to retirement age.
Irrevocable Trust will allow still allow some investment flexibility and long term value creation while minimizing the tax burden for the beneficiary.
Thanks to everyone who helped!
LLC to maintain flexibility even if the tax burden is higher. Also to reap some of the rewards of the investing prior to retirement age.
Irrevocable Trust will allow still allow some investment flexibility and long term value creation while minimizing the tax burden for the beneficiary.
Thanks to everyone who helped!
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