Why Do You Need an LLC For a Self-Directed IRA?

If you are interested in making alternative investments such as real estate or precious metals, a Self-Directed IRA LLC could be beneficial. Not only can an IRA LLC help save on transaction fees but it can also give you checkbook control to make retirement investments simpler.

Prior to creating an LLC for your IRA, there are a few key points you need to keep in mind.

Taxes

Many alternative investment investors choose an IRA LLC structure in conjunction with their Self-Directed IRA for easier transaction processing, particularly real estate investments which often involve multiple transactions that need to be managed simultaneously. Furthermore, using such an entity affords greater asset protection since any lawsuits or judgments against it cannot hold the IRA owner personally liable.

Utilizing an IRA LLC allows you to avoid needing the approval of your custodian on each individual investment, potentially saving on transaction fees. However, please keep in mind that an LLC may still need to file tax returns if it earns unrelated business income (UBTI) or receives distributions from an unrelated debt-financed facility (UDFI), in which case we offer assistance through our affiliated law firm.

Liability

The IRA LLC provides an excellent vehicle for investing in alternative investments like tax liens, real estate, private businesses and precious metals while bypassing custodian’s prohibitive transaction rules for Self-Directed IRAs. Furthermore, an IRA LLC with checkbook control allows investors to write checks or send wire transfers without going through their custodian.

An IRA LLC is the best way to invest in assets requiring active management, like hard money loans or auctions, because its structure enables it to pass through business income and expenses that would otherwise be subject to Unrelated Business Income Tax (UBIT). Furthermore, this arrangement will save on asset transaction fees as well as annual ones; but for passive investments a standard Self-Directed IRA with custodian is enough. For more information about our IRA LLC solutions contact Madison Trust where our experienced ERISA lawyers provide comprehensive ERISA support solutions.

Investments

An LLC gives an IRA investor greater control of their investments without waiting for custodian approval and reduces transaction fees, as well as opening up access to alternative investments like tax liens, real estate loans and precious metals. To establish one in your state requires choosing a business name and filing articles of organization with them along with any necessary fees; some require one-time establishment fees while others charge annual franchise taxes; additionally the IRA owner should appoint a registered agent as well as obtain an Employer Identification Number (EIN).

Once an LLC is established, an IRA can invest directly in it without fear of violating IRS rules or losing tax-advantaged status. An experienced attorney can ensure both entities comply with all state and federal laws.

Checkbook control

Checkbook IRA LLC investments allow you to invest directly from retirement funds without incurring custodial service-related transaction fees or needing permission from the custodian before making investments. This makes investing easier.

By making use of opportunities quickly, taking quick advantage of deals when they arise and quickly moving on if they don’t pan out and saving on expensive registration and renewal fees, this approach allows you to seize opportunities quickly while potentially saving yourself some money in registration or renewal fees.

Always comply with IRS rules when setting up an IRA LLC and avoid prohibited transactions, such as investing with disqualified persons or self-dealing (using your IRA to make personal benefits). As manager of your IRA LLC entity, ensure it operates efficiently while keeping accurate records; additionally file an IRS Form 1065 each year – it is advised that enlist the services of a tax professional when setting it up – Equity Doc Prep can assist with setting up such an entity through providing you with a specialized business checking account linked directly with your IRA account – creating an efficient business checking account that also contains your IRA account!