Can I Invest My IRA in an LLC?
IRAs can be invaluable tools in saving for retirement. They allow you to invest in various assets – you could even use one to buy real estate! But before making a final decision on where and how you invest, consult a financial advisor first.
An IRA LLC allows investors to acquire real estate of various kinds through an IRA, including residential, commercial and raw land properties that range from single family houses to multiple unit structures. You may also purchase contracts for sale and lease options.
IRAs are tax-advantaged accounts
Many self-directed IRA investors opt for LLC investments when looking at alternative assets, including Tax Liens, Equipment Leasing, Real Estate, or Private Equity investments. An LLC’s flexibility makes it an attractive option in these categories but requires careful management in order to avoid IRS penalties – therefore consulting with an advisor or CPA before investing your IRA into one is highly advised.
Before creating an IRA LLC, it’s necessary to open a new account at IRA Resources and submit a completed New Account Application. You can do this either online, via fax, email or USPS mail. After your account has been opened, funds from your IRA can be transferred over into an LLC bank account that you manage as manager – however no salary should be taken from it and personal funds shouldn’t be deposited into it either. An LLC offers more privacy when investing in property by having rental checks written in its name rather than your IRA name – providing more privacy when investing than an IRA does.
They can be invested in a variety of assets
IRAs can be used to invest in various assets, including real estate. This provides greater investment flexibility than traditional investments and can help diversify a portfolio. However, it is crucial to understand the IRS regulations surrounding such investments – for instance if investing through an LLC you must ensure rent checks go directly back into their bank account; otherwise the IRS could consider this transaction illegal.
Equally essential is making sure that an IRA and LLC do not commingle funds, as doing so could jeopardise their tax-advantaged status. To avoid this pitfall it is advisable to hire a professional with experience setting up IRA LLCs who understands all related regulations.
IRAs can invest in nontraditional assets such as private equity and real estate through an IRA LLC, giving the owner “checkbook control” of his or her investments.
They are self-directed
Self-directed IRAs enable investors to diversify their investments across alternative assets like real estate, precious metals and private equity with greater control and more flexible recordkeeping fees than IRAs do. But their costs and recordkeeping complexity make up for it by giving greater investment control back to investors.
Self-directed IRA investments can be risky and the IRS has strict rules in place that forbid certain transactions – such as dealing with disqualified individuals and engaging in self-dealing – intended to safeguard your IRA and prevent it from losing money and being misused for personal gain.
Investing in an LLC owned by your IRA should always be approached with caution, so professional advice from UpCounsel attorneys could prove essential in understanding legal structures and tax regulations. With their high success rates from top law schools such as Harvard and Yale and experience across industries, UpCounsel lawyers will be able to guide your IRA investment search in finding its ideal opportunity.
They are easy to set up
If your workplace retirement plan lacks a comprehensive selection of investments or you wish to diversify them further, an IRA is an excellent alternative for saving. An IRA allows you to diversify across mutual funds, exchange-traded funds (ETFs), bonds and individual stocks; choosing wise investments is critical for long-term returns – studies show asset allocation accounts for up to 90% of total returns! Selecting an assortment of stocks and bonds helps lower risk significantly.
Based on your tax situation, traditional or Roth IRAs could be right for you. There are also SEP IRAs and SIMPLE IRAs designed specifically for self-employed individuals or small-business owners with few employees that allow contributions while deferring taxes until withdrawal time in retirement.
SmartAsset’s free tool connects you with advisors serving your area who can assist in creating an IRA that best suits your situation and retirement goals.