Can an IRA Go Into an LLC?
To use an LLC for their IRA investments, investors must abide by IRS rules such as avoiding prohibited transactions.
An IRA LLC requires any income and expenses to flow through it; here are the advantages of an IRA LLC structure to help you assess if this strategy aligns with your retirement goals.
Tax-Advantaged Investing
An LLC is an ideal vehicle for self-directed retirement investors looking to invest in privately held businesses and properties, providing limited liability protection and increasing anonymity for IRA owners. Furthermore, LLCs often charge less per asset held compared to typical IRA custodians that charge per-asset fees.
However, when setting up an LLC IRA there are a few rules to abide by. For instance, it is crucial not to use it for personal gain or make yourself a salary as this would violate tax law. Furthermore, all income and expenses should be paid from within the IRA LLC rather than directly to its owner, in order to avoid prohibited transactions and IRS penalties. Finally, using an LLC makes investing easier as rent checks can be issued directly to it thus keeping their name off documents or titles related to real estate investments.
Tax-Free Profits
An IRA LLC provides additional advantages for investors than regular self-directed IRAs and is an ideal way of purchasing nontraditional investments such as real estate. An IRA/LLC provides tax-deferred profits, pass-through income, and enhanced privacy while making buying investment assets simpler by bypassing third-party custodians; unlike traditional retirement accounts it allows you to use your name as the owner so no one knows it is owned by your IRA.
IRA Resources can assist with creating an IRA LLC to invest in real estate, alternative investments, or start-up companies. Our team will handle every step of the process for you – including filing all necessary paperwork with the IRS in a compliant manner and offering very reasonable fees with no transaction fee! In addition, our fees are very reasonable and we never charge transaction fees! Additionally, we can assist with obtaining an EIN number and setting up bank accounts for your LLC.
Limited Liability Protection
LLCs give the owners of individual retirement accounts legal limited liability protection from creditors and lawsuits; however, this measure cannot provide complete immunity because some courts can still hold an IRA owner liable for actions taken by an LLC.
An LLC can also assist IRAs in avoiding prohibited transactions by segregating IRA funds from non-IRA funds. This is important, as the IRS imposes stringent restrictions that prohibit investing in certain people or entities that fall under disqualified person or prohibited transaction status.
An IRA LLC makes real estate investing simpler by providing access to an LLC business checking account and signing contracts directly. This can be especially helpful when purchasing property since many sellers require proof of ownership from IRA owners before accepting sales contracts. A trust can provide similar protection, although its formation occurs under contract rather than state law.
Flexibility
An IRA LLC gives you maximum control of your retirement funds and allows for self-directed IRA investments, including real estate. By eliminating custodian paperwork, it makes partnering with other investors on transactions easier – as well as investing in non-traditional investments like tax liens, private placements, equipment leasing and precious metals.
Your IRA owns 100% of an LLC and you can serve as its manager and sign contracts on its behalf, however the prohibited transaction rules still apply and it would be wise to consult with professionals experienced in this area of law before engaging any prohibited transactions yourself.
Establish a bank account for your LLC so you have checkbook control. All investments should be in the name of the LLC rather than personally, and rent checks should be payable directly to it instead of your IRA.
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