What Is a Self-Directed IRA LLC?
A Self-Directed IRA LLC combines a self-directed individual retirement account with a specially formed LLC, giving the IRA owner checkbook control over how retirement funds are invested.
How It Works
In a traditional IRA, the custodian holds the assets and must approve every transaction. With a Self-Directed IRA LLC, IRA funds capitalize a newly formed LLC. The IRA becomes the sole member, and the LLC opens its own bank account. The IRA owner, acting as manager, can write checks or initiate transfers directly to make investments. This is commonly called checkbook control.
What Can Be Invested In
Self-directed IRAs using an LLC structure can generally be used to invest in a broader range of assets than traditional brokerage IRAs. This can include real estate, private placements, precious metals, promissory notes, and other alternative assets, subject to IRS rules.
Why Investors Use This Structure
Investors with experience in real estate or alternative assets often want more control and faster execution than a custodian-directed IRA allows. The LLC structure provides flexibility while keeping the investment inside a tax-advantaged retirement account.
Compliance Considerations
A Self-Directed IRA LLC operates within IRS rules including restrictions on prohibited transactions and disqualified persons. The IRA owner must ensure the LLC is used strictly for the benefit of the retirement account. Violations can result in significant tax consequences, including disqualification of the IRA.
A Self-Directed IRA LLC combines a self-directed individual retirement account with a specially formed LLC, giving the IRA owner checkbook control over how retirement funds are invested.
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