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Can Roth IRA own an active business? Can I start a

Can Roth IRA own an...
Can Roth IRA own an active business?
Can I start a self-directed Roth IRA, contribute some minimum to it, then have Roth IRA form an LLC which will start a new active business? Would the profits generated by this business be tax free as well as distributions from the Roth IRA?
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Answered in 1 minute by:
3/8/2018
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 17,610
Experience: 15years with H & R Block. Divisional leader, Instructor
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Self-directed IRAs can be set up as Traditional IRAs or as Roth IRA.

There are very few types of investments you are not allowed to hold in a self-directed Roth IRA. In addition to the standard investments—stocks, bonds, cash, money market funds and mutual funds—you can hold assets that are not typically in a retirement portfolio. For example, in a self-directed Roth IRA, you can purchase investment real estate to hold in your account. You can also hold partnerships and tax liens—even a franchise business.

You cannot be apart of the business in the ROTH in any way. All you can do is fund the Self Directed ROTH. The amounts in it are not taxed until distributed.

Please let me know if you need more information.
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Customer reply replied 1 month ago
Sorry, need clarification. You say Roth CAN hold "... even a franchise business" but yet I "... cannot be a part of the business". So can Roth own 100% interest in an LLC managed by someone else besides me?
Also you say amounts are not taxed until distributed. I thought Roth is funded with after-tax money but the distributions are tax-free. Am I wrong?

Yes it can. In fact it would have to be managed by someone other than you or anyone related to you.

Yes it is not taxed as long as you meet the rules, 5 years and age.

Robin D.
Robin D., Senior Tax Advisor 4
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Experience: 15years with H & R Block. Divisional leader, Instructor
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