Gain Control of Your Retirement Savings with an IRA LLC
As a Self Directed IRA accountholder, you are likely aware of its benefits. You have the power to diversify your portfolio with assets that you believe in and provide a more reliable revenue stream. However, depending on your asset choice, you may want to consider how an IRA LLC can provide even greater investment freedom and flexibility.
Let’s explore what an IRA LLC is, how to set one up, what investments you can make, and if it makes sense for your retirement strategy.
What is an IRA LLC?
An IRA LLC (also known as Self Directed IRA LLC, Self Directed IRA with Checkbook Control, and Checkbook IRA) is an IRS-compliant structure that provides real-time access to your IRA funds. Just like a Self Directed IRA, with an IRA LLC you have the power to diversify your portfolio within a tax-advantaged account. However, the IRA LLC adds the benefits of eliminating custodian paperwork for each transaction and superior liability protection. The IRA LLC must be set up properly to achieve these advantages.
Madison Trust works with our sister company Broad Financial to bring the entity creation, support, and custody of your Self Directed IRA LLC together for a seamless experience. You can have peace of mind knowing that your IRA LLC is set up according to IRS standards, allowing you to focus on investing in the assets of your choice!
Who Owns the LLC in a Self Directed IRA?
The Self Directed IRA (not the accountholder) owns 100% of the LLC (Limited Liability Company). The Self Directed IRA accountholder typically acts as the non-compensated manager of the LLC.
Why Can an IRA LLC Invest in Real-Time?
What gives the IRA LLC accountholder the ability to invest in real-time is a designated IRA LLC checking account. If the Self Directed IRA accountholder is the manager of the LLC, then they can manage the checking account. This is known as Checkbook Control. This gives you the power to write checks on behalf of the Self Directed IRA without having to go through a custodian for every transaction.
What Investments Can I Make with an IRA LLC?
An IRA LLC gives you the freedom to invest in almost any asset and is ideal for investments that involve many transactions. For example, a real estate rental property investment involves many transactions such as purchasing the property, receiving rental income, and paying for repairs. An IRA LLC is beneficial for this type of investment, as it allows transactions to be completed swiftly and easily.
Here are some examples of investments you can make with an IRA LLC.
What are the Benefits of an IRA LLC?
Although you can enjoy the benefits of investing in alternative assets with a standard Self Directed IRA, an IRA LLC may be better depending on your asset choice and investment strategy.
You may want to establish an IRA LLC if you are looking to:
Invest on Your Time
With an IRA LLC, you’re able to bypass the custodian’s review of paperwork and perform transactions on your time.
Invest in Active Assets with Many Transactions
By having total access to your Self Directed IRA funds through a dedicated IRA LLC checking account, you can make as many transactions as you’d like in real-time. To invest, simply send a check or wire from your IRA LLC checking account.
Reduce Custodian involvement and fees
With the IRA LLC, there are no transaction fees and no custodian paperwork to complete per transaction. This gives you more time and more money in your pocket to invest!
Achieve superior liability protection
The LLC provides asset protection that shields the IRA, IRA owner, and IRA custodian from any liabilities and claims that may arise from the IRA LLC’s investments. A standard Self Directed IRA does not have this additional layer of liability protection.
How Do I Set Up an IRA LLC?
1. Open and fund a self directed ira account
All Self Directed IRA accounts, including the IRA LLC, must be held by a custodian, such as a bank or trust company like Madison Trust Company.
Once the account is established, transfer or rollover funds from a previous retirement account or complete an initial contribution.
2. establish an llc for your ira
It is recommended to have an ERISA attorney or IRA LLC facilitator prepare the LLC paperwork, to ensure it is IRS-compliant. Madison Trust’s sister company, Broad Financial, is an IRA LLC facilitator that can establish your LLC.
Explore More: Broad Financial's Role in IRA LLC Creation:
3. Open an IRA LLC Checking Account
The next step is to take your IRA LLC paperwork to the bank of your choice and open a business checking account. This is the part of the process that upgrades your IRA LLC to the power of checkbook control!
Then, instruct the Self Directed IRA custodian, Madison Trust Company, to send funds to the IRA LLC checking account. This is the only transaction that you must direct the IRA custodian to make until you take a withdrawal or distribution.
4. Invest with the IRA LLC
This is the most exciting step, as you can now start investing with the power of checkbook control instantly! As the non-compensated manager of the IRA LLC, you can use the IRA LLC checkbook to place all transactions. You have the freedom to purchase investments in real-time, pay bills, and deposit income back into the checking account. Start growing your investments in a tax-advantaged retirement account today!
Let's Dig into the Details: IRA LLC Things To Keep in Mind
Conclusion: Let's Put It All Together
A standard Self Directed IRA is great for investments that do not have many transactions such as raw land, private stock, or promissory notes. However, if you are looking to invest in more active assets like a rental property or real estate rehab project, an IRA LLC may be more beneficial.
The IRA LLC strategy offers significant advantages, such as speed and convenience. With checkbook control, you have the ability to manage your Self Directed IRA funds in real-time with ease. Rather than directing your custodian to perform IRA transactions, you can simply write a check or send a wire to manage your assets. There are also no transaction fees. Today’s the day to supercharge your self-directed investing with an IRA LLC!