What is a Self-Directed IRA LLC?
A Self-Directed IRA LLC, sometimes referred to as a “Checkbook Control IRA” or “IRA LLC”, allows investors to directly manage their IRA investments through an LLC.
What are the steps to establish an IRA LLC?
- Set Up a Self-Directed IRA: First, the investor must have a self-directed IRA with a custodian that permits IRA LLCs managed by the IRA owner.
- Form the IRA LLC: Second, the IRA owner must establish the LLC, which the IRA will own 100% of, making it the sole member. This step requires special language required by the IRA custodian.
IRA LLC Management
The IRA owner can serve as the Manager of the IRA LLC but must adhere to certain restrictions, such as not receiving compensation for their role as the Manager.
Benefits of an IRA LLC
- Investment Flexibility: The IRA LLC structure provides the opportunity for the investor to make a wide range of investments that might not be available through a custodian-managed account.
- Control: Investors can directly manage their IRA investments through the IRA LLC without any third-party involvement.
Risks of an IRA LLC
- Prohibited Transactions: Investors must avoid prohibited transactions, which can result in severe penalties, including the entire investment being treated as a distribution, which the IRS calls a “deemed distribution”. The entire amount of the deemed distribution will be taxed as income in that year of distribution unless the deemed distribution was made by a Roth IRA.
- Compliance: The investor must follow the Internal Revenue Code rules and IRS publications. Consulting with an attorney, CPA, or other tax advisor experienced with self-directed IRAs is highly recommended.
Additional Considerations for Setting up a Self-Directed IRA LLC
- Special Advisor: While not always required, some IRA custodians require a special advisor, such as an attorney or CPA, when the IRA owner is acting as the Manager of the IRA LLC.
If you are considering setting up a Self-Directed IRA LLC, contact the attorneys at Stross Law Firm, P. A. for a complimentary 30 minute consultation to discuss your needs.
0 Comments