Your IRA forms an LLC and is the single member and only owner of the LLC. The IRA owner is designated as the LLC manager and opens a bank account in the name of the LLC, funding the account from money out of the IRA. The manager can sign all LLC documents and has the critical responsibility of keeping accurate records and maintenance of the account. The manager also has checkbook control of the account and can write checks to purchase investments and to pay expenses directly related to any asset owned by the account.

Although some financial institutions may declare their IRA-LLC has been approved by the IRS, the checkbook-control investment option has not been confirmed by the IRS as an acceptable arrangement under the terms outlined IRC Section 4975. It is questionable whether the IRA owner and acting manager of an LLC, owned by the IRA, constitutes a prohibited transaction, and, to date, the IRS has not completely resolved this issue. Advanta IRA does allow an individual to invest using a checkbook IRA/single-member LLC, but requires the IRA owner to sign an indemnity agreement before the transaction is made.

These investing structures are also known as single-member LLCs and checkbook control IRAs.

We always advise the investor to perform thorough research and to seek the advice of a tax attorney or  financial professional prior to choosing to form and use a checkbook IRA.

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