Establishing a Self Directed IRA LLC
A Self Directed IRA LLC is where a self directed IRA purchases, or invests in, a new company and in this case a limited liability company. The Self Directed IRA owns the entire limited liability company, and you the IRA owner, manage the new LLC. This LLC manager's seat provides checkbook control and opens a whole new range of investment possibility for your retirement funds. You make your IRA account the member (owner) of the LLC and will assign a company manager who can receive compensation for services. The LLC manager will be running day-to-day company activities such as executing contracts, wiring funds and signing checks as directed. It's very important that you seek the help of an experienced professional about how to setup your LLC and management plan for your IRA.
There are regulations, formalities and rules that need to be followed, particularly in the beginning when first establishing your own self directed IRA LLC. First and foremost, your existing self directed IRA will be purchasing the shares of the LLC, which means your IRA must already be established, then you self-direct your retirement funds into this new LLC.
Many people do not choose to establish their own self directed IRA LLC, they turn to a professional provider of legal document services to prepare and file their formation.
Establishing a Self-Directed IRA LLC needs to be done procedurally to avoid future complications. It's important that your company formation and retirement investment account creation be done in order and in concert with the correct internal company operating agreement amendments. Transactions can be prohibited in the event that the IRA or LLC is not established and structured appropriately. Prohibited transactions are the achilles tendon of reaping lower fees and tax-free investment profits. If your IRA LLC ever comes under the microscope, it is always best that your organization and formation be correct. The price of IRA LLC service is nominal to avoid complications of this nature.
Transactions are only limited to those benefiting the retirement plan and are not between any disqualified parties. This is loosely defined below, for specifics, see IRS documentation on disqualified parties;
- The IRA owner or the spouse of the owner
- The IRA owner's immediate family, children, parents, etc
- An entity that is more than 50% owned by a disqualified person
- A 10% owner, officer, director or employee an entity owned by a disqualified person
- A fiduciary of the IRA
- Anyone that provides services to the IRA
Below is a list of prohibited transactions and other things you can't do with a self directed IRA LLC:
- Invest your retirement funds into the home you live in now
- Collateralize loans using retirement assets
- Selling personal property to the IRA
- Loaning money to disqualified persons
- Paying yourself fees
- Buying collectibles
- Purchasing life insurance
There's never a need to make a prohibited transaction with the limitless investment opportunity that self directed IRA LLCs provide. With checkbook control over your retirement funds, the self directed IRA LLC is the superior retirement fund vehicle for anybody who wants the ultimate in diversity.
Real Estate is a big deal with retirement fund investment and an IRA LLC. You are able to make quick decisions like act on short sales and can accumulate profits for the benefit of the retirement fund tax-free.
