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Should you use self-directed IRAs for your business?

As a business owner, you already understand the importance of building wealth. While many are building wealth through traditional means (i.e. Roth IRAs, 401k plans), most are unfamiliar with the concept of self-directed IRAs. Moreover, they don't know how a self-directed IRA can be beneficial in growing one's business.

With that, this post will briefly explain self-directed IRAs. 

Essentially, a self-directed IRA allows the custodian of the account to determine how the funds shall be invested. As such, the funds can be used for a number of different business purposes, including the purchase of real estate, equipment and even promissory notes. So, for example, a self-directed IRA can be used to buy and rehabilitate property for the business, and the proceeds from the sale of such property can be protected through the IRA so that they may grow in a tax deferred manner.

This way, when you reach the age of retirement, the proceeds can be accessed just like other IRAs.

While using a self-directed IRA seems like a dream come true for individual investors, there are rules that must be followed. After all, who wants to put their investment at risk because of rule violations? While it may go without saying, investors should be aware of prohibited transactions. Rule violations could result in substantial losses, including unpaid taxes on improper income.

Indeed, using self-directed IRA appears easy, but they should not be used without careful consideration of federal rules. If you have questions about self-directed IRAs, an experienced tax attorney can help.

The preceding is not legal advice. 

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