An IRA LLC offers investors the opportunity to pursue transaction-heavy or time-sensitive investments within the framework of a Self Directed IRA. This platform provides for the diversification of a standard Self Directed IRA but with the benefit of real time access to IRA funds. The tool that makes it possible is a designated IRA LLC checking account.


The process works as follows:

First, investors establish a Self Directed IRA with an IRA custodian such as Madison Trust Company. Then, instead of instructing the custodian to purchase an asset on behalf of their IRA, they instruct the custodian to send funds to an IRA LLC checking account. The account holder, acting in the capacity of non-compensated manager of the IRA LLC, then purchases investments, pays bills, and deposits income into the IRA LLC checking account. The flowchart below shows the movement of IRA funds from an existing retirement account to an IRA LLC:

Creating an IRA LLC

An ERISA attorney or IRA LLC facilitator generally prepares the LLC paperwork. They will file Articles of Organization with the Secretary of State’s office and prepare a specialized Operating Agreement. The Operating Agreement includes provisions related to retirement plan restrictions as outlined in IRC sections 408 and 4975. The LLC member is titled as “Madison Trust Company custodian FBO [Your Name] [Madison account #]”. The non-compensated Manager of the IRA LLC is generally the IRA accountholder.

Investment Structure:

A source of confusion for some IRA LLC managers is understanding which transactions require the involvement of an IRA custodian and which transactions are handled directly within the IRA LLC. A rule of thumb is that IRS-reportable transactions must flow through Madison Trust and transactions that are investment related can be done within the LLC checking account. Refer to the chart below for examples of how this rule plays out.

TransactionCustodian InvolvementIRA LLC
Distributions x
Transferring funds from an existing IRAx
Rolling over funds from a 401kx
Purchasing an asset (such as real estate, private placement, etc.)
Paying investment expenses
Depositing investment income

Annual Valuation

IRA custodians must file form 5498 annually for every IRA they hold. One of the purposes of the form is to provide the IRS with an updated value of each IRA. Madison Trust Company will reach out to accountholders in January of each year to request the fair market value of their IRA. For IRA LLCs, accountholders are generally not required to provide a breakdown of the type of investments held within their IRA LLC. Rather, a valuation of the combined cash and assets held in the IRA LLC is sufficient. For example, if the IRA LLC holds $10,000 cash in a checking account, owns a $50,000 piece of real estate, and is the holder of a Note valued at $25,000, then the fair market value of the IRA LLC is reported as $85,000.

Investing in an IRA LLC is easier than ever with Madison Trust Company’s streamlined process. The following flowchart outlines the process and supporting documents requirements.

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