Identification

• An entity inside of your IRA means you are investing in a limited partnership, a trust or some other legal entity. These investments are businesses of some sort. You are investing in them since the business is expected to be profitable and you want to share in the profits of the company.
  
  

Benefit

• The benefit of investing in an entity is that you may receive increased compensation for your increased risk in the investment of a private company. This may result in increased dividend payments from the company or unique investment opportunities in real estate or some other sector which is not readily available in a traditional investment or financial product.
  
  

Disadvantage

• An investment in an entity comes with special risks. For example, investing in a limited partnership means you must sell your shares of the company yourself. There is no secondary market for the sale of your stock. You either sell back to the company or you sell to another individual or company if they are willing to purchase those shares. However, you must negotiate the sale of the stock yourself.
  
  

Consideration

• You should only invest in entities inside of your IRA when you are certain you understand how the investment works. An investment in an entity may reduce the liquidity of your investment portfolio. For this reason, do not invest money into illiquid investments if you want money to be readily available for liquidation.