Checkbook control is a powerful tool that allows you, the IRA holder, to complete all investment activities through a physical checkbook tied to your IRA.
The IRA owns the Limited Liability Company (LLC), and the tax advantages pass through to the LLC. The LLC is just a tool within the IRA. It is still taxed and treated as an IRA, and it keeps tax-deferred or tax-free benefits.
Since the IRA owner acts as the LLC manager, you can essentially self-direct all investment activities yourself without custodian involvement. Your LLC holds monies in a bank checking account, and transactions are withdrawn or deposited into that account.
Advantages of an IRA LLC
The unique structure of an IRA LLC gives total control over to the account owner. The manager of the LLC, or the trustee, has complete signing authority over the account and does not have to wait for approval from the provider. Checkbook control expedites the purchasing of assets and the account manager’s decision-making abilities.
The IRA LLC is the owner of the assets within the account. You are 100% the owner of the LLC, and therefore, the LLC owns the assets within your account. Accuplan does not hold the assets within your IRA LLC.
Managing the LLC is as easy as managing a regular bank account. In fact, it is a bank account. The manager of the LLC will act as the signee, and these duties will include approving essential functions, like signing contracts, paying expenses and receiving funds associated with the checkbook IRA.
Steering clear of conducting a prohibited transaction is vital — accidentally doing business with a disqualified person may result in the IRS dissolving the offending account, along with fees and penalties.
A prohibited transaction can range from the asset that the LLC is invested in, like a collectible item or that business was conducted between the LLC and a prohibited person.
IRA LLCs and Tax Benefits
Your self-directed IRA (SDIRA) essentially owns and invests through the LLC. Since your self-directed IRA is a tax-deferred or tax-free entity, there are no additional taxable events when your IRA is used to invest through the LLC. Like with a self-directed IRA, as retirement funds flow through the LLC, they must also flow back into the LLC. Any income made through IRA investments must be deposited back into the LLC’s account, not directly to the account owner.
There can be some special taxable events depending on the type of income received by the LLC. One of these taxable events is Unrelated Business Income Tax or UBIT.
Note that the IRA owns the LLC. Your IRA might have to file an additional tax return if that income is taxable. Learn more about UBIT here.
Maximize the Benefits of IRA LLCs With Accuplan
An IRA LLC Set-up by Experts
Filing of Tax ID Number with the IRS
Competitive Setup Fees
Filing of State Articles
You want to enjoy the maximum benefits that come with a checkbook IRA account. At Accuplan, we help you achieve this by employing some of the most practical solutions for an IRA LLC account setting, such as:
- An IRA LLC set-up by experts: Our expert team will help you establish an LLC for your account — including registering an LLC with the Secretary of State’s office. Rest assured that your account set-up process will adhere to all established standards.
- Filing of tax ID number (TIN) with the IRS: We will help you acquire a TIN — in this case, an Employer Identification Number (EIN), associated with your IRA account to alert the IRS that your LLC is a tax-advantaged account. Filing a TIN helps you comply with the law and enjoy the full tax benefits of an IRA LLC account, such as tax breaks for a traditional IRA.
- Competitive setup fees: We offer competitive pricing models for every service, including setting up your IRA LLC account. Contact us today to learn more.
- Filing of State articles: Your checkbook control IRA isn’t legally viable if you have not satisfactorily filled in the requisite legal forms. Our team will help you write an operating agreement that aligns with IRS restrictions, such as undue compensations, disqualified personnel and prohibited transactions.
Once the IRA LLC is established and active, our facilitators will provide you with a handbook that outlines what you can and cannot do with your account. This way, you remain within the legal confines of using a checkbook IRA account.
The Process of Establishing an IRA LLC With Accuplan
Accuplan’s expert IRA LLC team has an average setup and processing time of 1-2 weeks, depending on the state in which the LLC was created. We are a full-service self-directed IRA provider, authorized and regulated by the Internal Revenue Service in all 50 states for all IRA LLC establishments.
Our IRA LLC establishment process:
- Free consultation on the specifics of your retirement accounts’ needs and goals, transaction fees and what role Accuplan will play
- Assisting with the setup and funding of your new self-directed IRA account (if applicable)
- Writing an LLC operating agreement and filing necessary paperwork in the specific state where the LLC resides, as well as all federal filings, prepared by our legal team
- Professional assistance with establishing a particular bank or brokerage account that’s tied to your LLC
Accuplan Benefits Services can set up the Checkbook IRA LLC to be incorporated in the state where investments are made (i.e., real estate property). The IRA owner does not have to pay additional taxes or filing costs if the state differs from where the IRA owner resides.
Who Uses Checkbook IRAs?
Checkbook IRA accounts are ideal for investors looking to manage their IRA accounts closely and those who are interested in investing in alternative assets, such as:
- Promissory notes
- Tax liens
- Precious metals
- Real estate
Experienced, savvy investors who are unsatisfied with the returns or diversification available through traditional investments can fully benefit from checkbook control IRAs. These accounts offer the potential for greater returns through the ability to invest in alternative assets, making them attractive to experienced investors. The major shortcoming of the SDIRAs is that they can also come with higher risks.
As an investor, you can enjoy the most benefits from an SDIRA LLC if one or more of the following apply to you:
- You’re eyeing real estate investments.
- You’re interested in acquiring signing authority over your investments.
- You’re looking for checkbook control of your retirement funds.
- You’re teaming up with a business partner or spouse.
- You have a high net worth and are looking to make investments in alternative assets.
Sign up to receive our limited-time email series about avoiding potential disqualifying mistakes, and get answers from our SDIRA experts on the most often-asked questions regarding operating a checkbook IRA LLC within a self-directed IRA.
Operating a Checkbook IRA with Accuplan assisting you will forever change the way you invest.
Self-Directed IRA LLC FAQs
Here are the most common questions about opening and using SDIRA LLCs.
A self-directed IRA LLC is a tool that self-directed investors utilize to quickly and conveniently purchase an asset or easily pay expenses and upkeep for real estate or other investments. It’s a physical checkbook tied to the IRA, and the IRA holder has signing authority to make and complete purchases without custodial interference.
All IRS rules about a self-directed IRA also apply to an LLC. IRA LLC prohibited transactions include collectibles, life insurance and S corps.
Yes. In 1996, the Tax Court case Swanson v. Commissioner was affirmed and further confirmed by the IRS in Field Service Advisory in 2001. An IRA LLC is legal and an essential tool for self-directed investors.
Some responsibilities of the LLC manager are filing annual reports, filing tax returns for the entity or reporting fees. Filing 1099’s or other IRS reports might also be necessary.
Ready to start investing and open an LLC with your self-directed IRA?
Call us with your questions, or open an account below.
800-454-2649