IRAs As Crowdfunding Investors

Many Americans, including many accredited investors, self-direct their Individual Retirement Accounts, meaning they choose what to invest in and how much. As such, self-directed IRAs are a great target market for Crowdfunding portals.

But sometimes even too much of a good thing is too much. If IRAs and certain pension plans take 25% or more of a deal, then the complicated ERISA rules come into play. The assets of the deal itself – whether a real estate project, a tech startup, or otherwise – are deemed to be “plan assets,” with the following undesirable consequences, among others:

  • The project sponsors will be subject to ERISA’s stringent fiduciary duties
  • In some situations, the project sponsors must be registered investment advisors
  • The project is subject to annual reporting, open to the public

To make sure that doesn’t happen, portals should bake a measuring tool into their technology, flashing red as investments from IRAs and pension plans approach 25%.

Questions? Let me know.

6 thoughts on “IRAs As Crowdfunding Investors

  1. Great post! I have a question because I’m not familiar with these rules.

    If I raise equity for a real estate deal and let’s say I raise the entire 25% equity stake needed for the bank from private investors and it’s all IRA money, do these ERISA rules still come into play even if I don’t use a portal?

    I’m glad you shared this info because the ERISA rules are brand new to me.


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