Can an LLC Own Precious Metals?
Gold and silver investments have become increasingly popular. The IRS imposes specific rules regarding their taxation.
Precious metals held physically are considered collectibles by the IRS and therefore subject to the maximum tax rate of 28% on long term capital gains.
By creating an LLC, you can avoid taxes while simultaneously protecting your investment. It is crucial that you maintain detailed records of both costs and sales for an LLC business.
Title to the Metals must be in the LLC’s name.
Though many financial securities are subject to long-term capital gains rates, the IRS treats physical holdings of gold, silver and other precious metals as collectibles with tax liabilities reaching 28% maximum. You may be able to reduce this liability if your cost basis includes dealer premiums, storage fees or any other associated costs.
An LLC provides your precious metal investments with added asset protection. Should a judgment creditor seek to go after your personal assets, an LLC provides additional barriers between themselves and any such assets held within its walls – they would have to fight through them in order to access your precious metal holdings.
Precious metal investments often come in the form of physical coins and bars of gold and/or other precious metals; family heirlooms or jewelry may also qualify. Precious metals are seen by many investors as an excellent way to diversify their portfolio, providing protection from inflation while being more secure than most currencies.
Asset Protection
Asset protection is the legal term that refers to strategies and techniques designed to shield an individual’s assets from financial litigation, lawsuits or judgments. Asset protection strategies may involve employing offshore structures, trusts and estate plans as well as corporate restructuring procedures in order to protect one’s wealth from legal proceedings or judgments.
Precious metals held within an LLC offer some degree of protection against creditors because the assets are considered company property instead of personal assets; however, courts can “pierce through” and take legal action against individuals’ personal assets directly.
An LLC may help lower the tax amount you owe when selling precious metals, as the IRS treats collectables like precious metals as collectables subject to higher capital gains rates than other assets. An LLC can help by making an annual qualified elective deferral (QEF) election that reduces taxable sale profits from 28% down to the lower capital gains rate of 20%.
Taxes
Once precious metals are owned by an LLC, they become company assets rather than personal assets for its members, offering limited liability protection. Furthermore, any debts accrued by the company cannot attach themselves directly to them and be attached as attachments against personal assets of members.
However, the IRS considers physical gold and silver to be collectibles with an maximum long-term capital gains tax rate of 28%; additionally sales of these investments are subject to ordinary income taxes; therefore it is imperative to keep accurate records to avoid costly tax mistakes.
As surprising as it may seem, investing in precious metals through an LLC offers several advantages. Not only can it protect assets while also offering privacy protection – holding metals in an LLC cannot be linked back to individuals – it’s also great for estate planning as this way you can pass down ownership directly to heirs rather than going through probate.
Distributions
When selling precious metals, the IRS usually taxes you based on their cost basis – this takes into account both what was paid for them as well as related costs such as storage and insurance premiums.
An LLC can be an effective asset protection strategy for investing in precious metals. This is due to their being considered assets of the company rather than personal belongings of its members, protecting members from personal liability in case of lawsuit.
Additionally, it is possible for an IRA to invest in precious metals through an LLC and then directly take physical possession without needing a custodian – this strategy is known as Gold or Precious Metals IRA LLC and has become more prevalent as people lose confidence in banking systems. While this strategy comes with additional costs and complexity – including setting up and managing an LLC – many individuals find this approach more cost effective than using traditional banking structures.
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