Purchasing a small business through a Roth IRA

[Vash P.]

Hey BP! I have a few questions for more experienced guys and I'm hoping for some help. Thanks in advance! Here goes:

I have an experienced small business owner in the family looking to get into a new business (fast food chain). The seller is asking $1.2 million for property + business with no option for owner financing. The family member is looking for an investor to put up a down payment in exchange for equity and/or contract for portion of the net income. 

If I were to put in the down payment, what are the best options, how can I get creative with the financing?

Say we setup an LLC and register as an S corp, splitting the equity 50/50. In that case, I can put in 100% of the down payment, collect 50% of future net income. Would that income be taxed based on my personal tax bracket?

What if I setup a Roth IRA (to be honest, I'm posting this for someone else who is much closer to 59 than I am, so keep that in mind)? Is it possible to own 50% equity through the Roth and only be taxed on the original down payment that would have to go through the Roth but not future income?

Would it maybe be better to go through the Roth but instead of owning equity, set up a contract that the family member would then have to pay my IRA a certain percentage of net income? In essence, he keeps all the equity, I just collect a larger portion of the income to compensate me for lack of equity.

Thank you!

Edit: I should mention that I understand we will need to get a professional to really figure this out, but we're doing early phase due diligence still and looking at the options. Just need general guidelines at this point.

[Dmitriy Fomichenko]

Vash,

keep in mind that when you invest in an active business with a retirement account the income will be taxed at UBIT rate, here are more details:
https://www.irs.gov/charities-non-profits/unrelate...

The rate for UBIT tops at almost 40% so be sure to run this with experienced CPA in order to understand the tax impact.