An IRA LLC provides the diversification of a 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. Here's how the process works.
Open a Self-Directed IRA: First, investors establish a Self-Directed IRA with a Self-Directed IRA custodian such as Madison Trust Company. This is a quick process and should only take a few minutes.
Establish an LLC for Your IRA: 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 Internal Revenue Code sections 408 and 4975. The LLC member is titled as "Madison Trust Company custodian FBO [Your Name] [Madison Trust account #]" in the official paperwork. The non-compensated manager of the IRA LLC is generally the IRA account holder.
Open an IRA LLC Checking Account: The IRA account holder takes the IRA LLC paperwork to a bank of their choice and opens a business checking account.
Fund the IRA LLC: First, fund the Self-Directed IRA via a transfer, rollover, or initial contribution. Then, the Self-Directed IRA account holder instructs Madison Trust to send funds to the IRA LLC checking account.
Invest With the IRA LLC: The account holder, acting in the capacity of the non-compensated manager of the IRA LLC, uses the IRA LLC checkbook to make transactions. They can purchase investments in real-time, pay bills, and then deposit income back into the checking account.
Checkbook IRAs is best suited for active investments that require multiple transactions. For example, a real estate rental property involves receiving rental income, paying maintenance fees and other expenses, and requires timely completion of contracts and closing documents.
A Self-Directed IRA with checkbook control allows the investor to make all of these transactions seamlessly through a designated checking account. Transactions can be made immediately and without any added fees. More examples of investments that work best with a Checkbook IRA are:
Complete our simple online application.
Fund your account via transfer from an IRA, rollover from a 401(k), or a contribution.
Work with our sister company, Broad Financial, who will create a specialized LLC or Trust for your IRA. You will set up and fund a designated checking account at the bank of your choice, giving you checkbook control.
Invest in the asset of your choice immediately by simply writing a check or sending a wire from your designated bank account.
Do I still need a Custodian if I have a Checkbook IRA?
Yes! The IRS requires all retirement accounts to be held by a custodian. Custodians may include banks, trust companies, or any other entity approved by the IRS to act as an IRA custodian. A Checkbook IRA is under the umbrella of a Self-Directed IRA, which allows account holders to invest in alternative assets in a tax-advantaged account.
Is a Checkbook IRA legal?
Should I open an IRA LLC or an IRA Trust?
Depending on your investments and retirement goals, you may choose to establish an IRA LLC or an IRA Trust. They both allow you to invest in alternative assets in real-time with no transaction fees, but each account type does have certain benefits. An IRA LLC lets you partake in multi-member investing and an IRA Trust does not have any state fees or reporting requirements.
If you already have a specific asset in mind, then your next step should be to get educated. Speak with a Madison Trust Specialist and find out if an IRA LLC or IRA Trust will better serve your investing needs. Making the right decision now can save your account a tremendous amount in the long run.