How to Fund a Social Enterprise With IRA Funds

You can find investments with a positive social purpose.

Social enterprise, also known as social entrepreneurship, is a business model that uses general business and market strategies for higher social benefit. While there are socially responsible funds and publicly traded social enterprises, most such endeavors are individually owned smaller businesses. As such, you need to structure your IRA so that you are able to invest in these types of companies. While many IRA custodians do not allow investments in such private ventures, there are many that do.

Difficulty:

Moderate

Instructions

1. Determine what companies fulfill your personal requirement of social enterprise. Generally, the output of the company results in high profits and improved social existence. The mission statement of Google strongly suggests that it is a company based on the principles of social enterprise. The mission of Google is to improve the way each person can access information. Similarly, Coca-Cola once had a campaign that sounded very similar. You will need to personally evaluate whether these companies fulfill your goals. You may seek companies that devote a percentage of their profits to improving the livelihood of indigenous people, or that invest in programs highlighting the cultural diversity in a community. Each person is different. You may find something publicly traded or a local organization that you wish to support.

2. Determine if your existing IRA structure is capable of investing in the company or fund you have chosen. If the equity is publicly traded on any of the major stock market indexes, you can use any custodian who offers brokerage services. Bank IRAs will be excluded from this. If the asset is not publicly traded, you will need to find a firm that allows you to buy private company stock.

3. Roll your IRA assets into an IRA that is able to buy the asset. Self-directed IRA custodians such as Pensco Trust, Entrust Group and Equity Trust Co. allow these types of assets into the IRA.

4. Purchase the asset by contacting your customer service representative and placing the order. Fill out any required paperwork for a private stock purchase in a self-directed IRA.

Tips & Warnings

• If you have any questions or concerns regarding IRAs and social enterprise, you should contact your financial adviser. Failure to comply with IRS regulations regarding IRAs can lead to significant tax consequences and penalties.

References

• NuWire Investor: Self-Directed IRA: A Savvy Investor's Little-Known Secret
• Isoph Institute: A look at Google: Billion-dollar Social Entrepreneurship?
• Fair Trade Fundraising: Self Directed IRAs for Social Enterprise

Resources

• Equity Trust Company: About Equity Trust
• Pensco Trust Company: Why Pensco
• Entrust Group; Benefits