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September 14, 2023

Get the Answers to Common IRA LLC Questions

Key Points 

  • An IRA LLC, also known as a Self-Directed Checkbook IRA, is a type of retirement account that provides the account holder with checkbook control of their IRA funds.
  • Setting up an IRA LLC involves opening and funding a Self-Directed IRA, establishing an LLC for that IRA, and the creation of a dedicated checking account.
  • The benefits of an IRA LLC include full checkbook control, the ability to place real-time investments in alternative assets, and potential savings on transaction and asset-based holding fees.
Investor on a tablet that says

In the realm of retirement accounts, a variety of options exist to cater to different financial goals and investment strategies. Among these, the Individual Retirement Account (IRA) is a popular choice due to its tax advantages. However, for individuals seeking greater control of their retirement funds and a broader range of investment opportunities, an IRA LLC, also known as a Self-Directed Checkbook IRA, could be the ideal solution.

An IRA LLC offers a unique blend of flexibility and liability protection, allowing you to venture into alternative investments while safeguarding you (the account holder) and your IRA. Despite its seemingly complex nature, understanding an IRA LLC is quite straightforward once you break down its components. Here are answers to the most common questions we receive about IRA LLCs:

First, a Quick Primer: What Is a Self-Directed IRA and IRA LLC?

Diversifying Your Portfolio Infographic indicating that with a Self-Directed IRA you can invest in private equity, real estate, cryptocurrency, gold, hedge funds, standard assets (stocks, bonds, and mutual funds), and more.

Before diving into the specifics of an IRA LLC, it's essential to understand the two entities that constitute it — the Self-Directed IRA and the LLC. A Self-Directed IRA is a type of IRA that offers the account holder the freedom to invest in a wider range of assets than a standard IRA. These can include real estate, private businesses, cryptocurrency, promissory notes, and other alternative assets.

Meanwhile, an LLC is a type of business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. This structure protects the company's owners (members) from being personally liable for the company's debts or liabilities.

Can a Self-Directed IRA Own an LLC?

Yes, a Self-Directed IRA can own an LLC in two primary ways. At the account level, a Self-Directed IRA owner can establish an LLC, which it owns entirely. This setup, often referred to as a Checkbook IRA, provides the account holder with checkbook control of their IRA funds. Checkbook control is the ability to write checks and send wires from a dedicated LLC checking account without having to go through the Self-Directed IRA custodian for everyday transactions.

At the investment level, a Self-Directed IRA can invest in private businesses, including LLCs. In this case, the IRA purchases a membership interest in the LLC, effectively investing the retirement funds in the business. Learn more about investing in an LLC or private business with a Self-Directed IRA.

Happy business woman signing a check through her Checkbook IRA.

What Is an IRA LLC?

An IRA LLC is a type of Checkbook IRA that allows the account holder to maintain direct control of their Self-Directed Checkbook IRA investment transactions. The LLC is established following state requirements, and a checking account is opened under the LLC's name. This checking account serves as the IRA LLC’s bank account, ensuring a clear separation between the IRA funds and personal funds.

What Are the Benefits of an IRA LLC?

Purple sticky note with “LLC: Limited Liability Company” written on it in pen, colored pencils, and paperclips and notebook next to it on the table too.

An IRA LLC most notably provides checkbook control, enabling you to act on investment decisions swiftly without needing custodian facilitation for everyday transactions. This control allows the investment process to be more efficient and timely, which can be crucial for certain types of investments like real estate, where timing is often critical.

As a form of Self-Directed IRA, an IRA LLC also inherently enables you to diversify your investment portfolio by investing in a wide array of alternative assets in real-time. And, with an IRA LLC, you can significantly save on transaction fees, as you're conducting transactions yourself.

How Does an IRA LLC Work?

When you form an IRA LLC through Broad Financial, the IRA LLC setup process is fast and seamless. First, you will open and fund a Self-Directed IRA with our sister company and Self-Directed IRA custodian, Madison Trust. Once the IRA is set up, one of our Broad Financial Specialists will assist you in establishing an LLC for the IRA, following your state's guidelines.

After the IRA LLC is formed, you will need to open a checking account for the LLC. At your direction, Madison Trust will send your retirement funds from your Self-Directed IRA to your dedicated checking account, funding the LLC.

With these steps completed, you can begin investing using your IRA LLC. To place an investment, simply write a check or send a wire directly from your LLC's checking account. All income and expenses related to the asset flow through the LLC to the IRA.

Checkbook IRA LLC investor calculating how much their IRA LLC investment grew and placing money into a piggy bank which signifies their IRA LLC checking account

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

Self-Directed Checkbook IRA Specialist answering investors questions about IRA LLCs.

While not a necessity for all Self-Directed IRA holders, an LLC is an option if you’d like to gain checkbook control of your retirement investments. If you're looking to invest in alternative assets in real-time to save for retirement, an IRA LLC may be the ideal account for you.

An IRA LLC is a powerful tool that can offer greater control, protection, and flexibility while investing for retirement. To learn more and get the answers to any additional questions you may have, schedule a call to speak with one of our Broad Financial Specialists today.

Disclaimer: Broad Financial LLC does not provide legal, tax, or investment advice. Please consult with your tax or legal advisor before making investment decisions. 


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