Build Wealth Your Way with a Checkbook Control IRA

If you want more control over your retirement funds and investing decisions, a checkbook control IRA is the account for you. Also known as a checkbook IRA or a checkbook IRA LLC, these entities make investing quick and easy because you can write checks directly from your IRA funds. This article explains how it works and answers popular questions regarding these investment entities.

A checkbook IRA is a self-directed IRA that operates within the umbrella of an LLC. These entities have all the benefits and investment opportunities self-direction offers. Plan owners choose their own assets and can invest in alternatives like real estate, private equity, and crypto. But checkbook IRA LLCs enjoy the added protections and benefits that LLCs offer, giving account owners even more flexibility and control over their retirement funds.

How Is a Checkbook Control IRA Different Than a Self-Directed IRA?

This is an image of a checkbook and portfolio summary documents1. You can purchase investments without the assistance of your IRA’s administrator.

With a self-directed IRA, when you find investments, you must work with your administrator to acquire the assets. You must submit buy direction letters to the administrator, instructing them to use funds from your IRA to purchase the asset.

Checkbook IRAs cut out the IRA administrator in the investment process. Instead of working through the administrator to facilitate the acquisition, you—as the manager of the IRA LLC—can simply write a check from your IRA funds to make the purchase.

2. You can snap up assets quickly—ahead of your competition.

One of the top benefits of checkbook IRAs comes in handy when investors are interested in popular assets such as real estate and tax liens—when many people are competing to purchase the same investment. Having instant access to funds gives you a critical head start when time is of the essence. You don’t have to communicate with and wait for your IRA administrator to buy the investment for your plan. It’s as easy as taking out your IRA LLC checkbook and writing a check for the investment.

3. You can write checks directly from IRA funds for bills and services.

Writing bills for investment-related expenses is also a plus. For example, people who invest in multifamily real estate typically have consistent bills to pay, from property management fees to maintenance issues. If you have a self-directed IRA, you must work with your administrator to pay bills on your behalf from your IRA. But, with a checkbook control IRA, you can write checks from the IRA LLC bank account to pay for bills and services relevant to your investment. You don’t have to wait on your IRA administrator to pay for things like plumbing services or items needed for maintenance and repairs.

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How Do I Open an IRA LLC?

Below are the basic steps to set up the IRA LLC:

  1. Your self-directed IRA forms an LLC and is the sole member of the LLC.
  2. You appoint yourself as manager of the LLC.
  3. As manager, you open a bank account in the LLC’s name and fund it with money from your IRA. This is not the same as taking a distribution, so there is no income tax liability on the moved funds.
  4. Once the account is funded, you can write checks for investments and pay bills on behalf of the LLC.

And a few important points to remember:

  • You must follow IRS rules for self-directed IRAs (such as prohibited transactions) as well as regulations for LLCs. We recommend you work closely with your IRA administrator and CPA or other tax professional familiar with these investing structures to ensure compliance.
  • LLCs have a whole different set of recording and reporting requirements. As manager, you’re responsible for knowing and following these rules.
  • You may not use any funds from the IRA LLC bank account for personal purposes.
  • You must do your own due diligence in investigating the investments you choose to ensure they are viable and allowed assets in your IRA. When in doubt, seek the advice of a professional.

How Much Does an IRA LLC Cost?

Initially, setting up the LLC may be a bit expensive. However, over time you’ll save on some IRA fees associated with investing because you are doing a lot of the work on your own. The most important thing is to set-up and manage your account correctly. Failure to do so can be costly, get you in trouble with the IRS, and possibly cause you to lose the tax-sheltered status of your IRA. We recommend you seek the advice of an attorney who is familiar with checkbook control IRAs, how they work, and how to properly open and operate these entities. Beware of companies that offer checkbook IRA LLC setup packages. It is often less expensive to have an attorney or CPA set up your LLC and have a company like Advanta IRA administer it.

What Investments Are Allowed in Checkbook Control IRAs?

The same alternative investments that are permissible in self-directed IRAs are available for checkbook control IRAs. Popular investments in a checkbook IRA include:

There are many other alternative investments allowed in checkbook control IRAs. The above is a list of fast-paced investments and other assets that might require considerable expenses, which may be easier to manage from an IRA LLC.

Final Thoughts from Advanta IRA

Regardless of what investments you choose, it’s easy to see how a checkbook IRA is beneficial. You gain an added layer of control when you can not only choose your assets, but also write the checks to acquire them when time is of the essence. The ability to pay bills and other expenses related to your investments can save you time and help keep your finger on the pulse of the wealth-building potential in your account.

Advanta IRA is a self-directed IRA administrator with over $2 billion in client assets under management. If you’d like to learn more about checkbook control IRAs, contact us today.

About Scott Maurer

Scott Maurer, Vice President of Sales for Advanta IRA, is a recognized expert in the field of self-directed IRAs. With a law degree from the University of Florida and as a designated Certified IRA Services Professional (CISP), Scott’s keen understanding of rules and regulations fuels his passion to educate others on the power of investing in alternative assets using self-directed IRAs. Scott is a frequent guest on retirement and investing webinars and podcasts, and he has shown thousands of individuals how to achieve financial freedom by teaching them how to use their retirement funds to invest in private placements, real estate, private lending, and more. Throughout his two decades in the industry, he has watched numerous unique investments unfold, giving him great perspective of what is possible when people take control of their retirement funds and investing decisions.