--- title: Can I invest in an entity I or a family member owns? description: Help Center --- [Skip to content](https://support.aetrust.com/can-i-invest-in-an-entity-i-or-a-family-member-owns#main-content) English Show submenu for translations [More support](https://support.aetrust.com/kb-tickets/new?hsLang=en) [Customer portal](https://cs.aetrust.com/tickets-view?hsLang=en) [![American Estate & Trust](https://support.aetrust.com/hubfs/Website%20Assets/Logo%20Assets/logo-text.svg)](https://support.aetrust.com/?hsLang=en) Open main navigation Close main navigation - English Show submenu for translations - [More support](https://support.aetrust.com/kb-tickets/new) - [Customer portal](https://cs.aetrust.com/tickets-view) - [Contact us](https://aetrust.com/contact) [Contact us](https://aetrust.com/contact) How can we help you? - There are no suggestions because the search field is empty. 1. [Help Center](https://support.aetrust.com/?hsLang=en) 2. [Investor Portal](https://support.aetrust.com/investor-portal?hsLang=en) 3. [Prohibited Transactions and Compliance](https://support.aetrust.com/investor-portal?hsLang=en#prohibited-transactions-and-compliance) # Can I invest in an entity I or a family member owns? Investing through an **Individual Retirement Account (IRA)** provides great flexibility, but the IRS has strict rules regarding **who and what your IRA can invest in**. A common question is whether an IRA can invest in a company or business owned by you or a family member. The short answer is: **In most cases, no.** The IRS prohibits certain transactions between an IRA and a **disqualified person**, which includes you and certain family members. If your IRA invests in an entity owned by a disqualified person, it is considered a **prohibited transaction** and can result in severe tax penalties. ### **Understanding Disqualified Persons** Before determining whether an investment is allowed, it's important to know who is considered a **disqualified person** under **IRS Code § 4975**. A **disqualified person** includes: - **You** (the IRA owner). - **Your spouse**. - **Your parents and grandparents**. - **Your children and grandchildren**. - **Spouses of your children or grandchildren**. - **Any entity (LLC, corporation, trust, etc.) that you or a disqualified person own 50% or more of**. Since these individuals and entities are disqualified, your IRA **cannot** engage in any transaction with them, including investing in a business they own. ### **When Is Investing in an Entity Prohibited?** Your IRA **cannot** invest in an entity if: ✅ **You** personally own **50% or more** of the entity. ✅ A **disqualified family member** owns **50% or more** of the entity. ✅ You or a disqualified person **control the entity** (even if ownership is less than 50%). ✅ The investment results in a **direct or indirect benefit** to you or a disqualified person. ### **Example 1: Investing in Your Own Business** **❌ Prohibited:** You own 60% of a small business and want your IRA to invest in it. Since you own more than 50%, your IRA **cannot** invest. **✅ Allowed:** You own **less than 50%** of a company, and the remaining ownership is with unrelated individuals. ### **Example 2: Investing in a Family Business** **❌ Prohibited:** Your IRA buys stock in a company that your father owns 80% of. Your father is a **disqualified person**, making the transaction **prohibited**. **✅ Allowed:** Your IRA invests in a company owned entirely by unrelated third parties. ### **When Is Investing in an Entity Allowed?** Your IRA **may** invest in an entity if: ✅ You **own less than 50%** of the company. ✅ No **disqualified persons** collectively own 50% or more. ✅ The investment does **not** personally benefit you or any disqualified person. ### **Example 3: Investing in a Friend’s Business** ✅ **Allowed:** Your IRA invests in a company owned by a business partner and other unrelated investors. As long as you don’t **own or control** the company, the investment is permitted. ### **Example 4: Investing in a Publicly Traded Company** ✅ **Allowed:** Your IRA purchases stock in a large public company, even if you or a family member work for the company, as long as neither of you has controlling interest. ### **Consequences of a Prohibited Investment** If your IRA makes an **improper investment**, the **entire IRA could be disqualified**, resulting in: ❌ Immediate taxation of the entire account balance. ❌ Additional **penalties and interest** on unpaid taxes. ❌ Loss of **IRA tax advantages**. To avoid these consequences, it’s best to **consult with AET’s support team or a tax professional before making an IRA investment**. ### **Final Answer: Can You Invest in an Entity You or a Family Member Owns?** ✔ **Yes**, but **only if** you and all disqualified persons collectively own **less than 50%** of the entity **and** you do not control it. ❌ **No**, if you or any disqualified person **own 50% or more**, or if you receive a **personal benefit** from the investment. 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