Can my Equity Partner (Father) Invest in my LLC with SDIRA Funds to Flip Homes?

[Jonathan Drago]

Hello BP World:

My equity partner is my father. We are going into business together to flip homes in FL and are looking for some advice. I am setting up an LLC, and he is planning on investing in my LLC as a minority shareholder from a separate LLC. He will be providing 100% of the capital for our flips and I will be doing all of the work on the ground.

He is interested in funding our flips from an SDIRA. Is this possible with this sort of business structure? I know that I am considered a disqualified person as I am a family member with direct lineage.

Is it possible for his separate LLC to invest in mine (listing him as a MGR in my LLC - or not), or is it still considered self-dealing or him receiving indirect benefits? We are trying to figure out the best possible way for him to fund our flips, and if using an SDIRA is even possible.

Any help is much appreciated!

Thanks,

Jon

[Brian Eastman]

@Jonathan Drago

Absolutely not.

You and any business you control are viewed as a disqualified party to your father's IRA. Any direct or indirect transaction between his IRA and such a disqualified party would result in a self-dealing prohibited transaction for his IRA with severe tax consequences.

Your father's IRA could be used to form a new real estate development business using a Rollover as Business Startup program. That is a pretty extreme commitment on his part to your business, however.