Self-Directed IRA LLC

A Checkbook IRA is a self-directed IRA that forms a single-member LLC and obtains the ability to write checks directly out of the IRA for the purchase of alternative investments.

When the self-directed IRA owner is the acting manager of the single-member LLC, and a bank account is opened in the name of the LLC, the result is commonly referred to as “checkbook control” since the LLC owner has the control and authority to write checks directly out of the IRA for investments.

Checkbook control gives investors the ability to act more quickly to complete transactions and can also potentially save administrative costs incurred by the IRA. A checkbook IRA can acquire the same types of alternative investments that traditional self-directed IRAs can.

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Once the self-directed IRA forms a single-member LLC, it may enjoy the status and protection that an LLC provides. The IRA is listed in the LLC operating agreement as the single-member/owner and then an individual (in many cases, the IRA account owner) is listed as the manager of the LLC. Once the IRA has deposited cash into the LLC’s bank account, the manager of the LLC then has the ability to direct funds out of the checkbook for the LLC.

While checkbook IRAs can be very flexible, there is also an increased potential for an individual to engage in a prohibited transaction with this type of entity.

Investors pursuing this option should check with a legal advisor about the wisdom of personally serving as the manager of the LLC as the manager of the LLC will be tasked with ensuring the LLC and IRA stay compliant within IRS guidelines. Advanta IRA does not give any legal endorsement or review to these types of entities, but you may use your IRA to invest in them if you feel comfortable doing so.

Tip: Do not use a one-stop shop to set up your IRA and the LLC for you. You can get better (and cheaper) service by using Advanta IRA and your local attorney. If you need a reference for an attorney or CPA to help you set up the LLC, please contact Advanta IRA and we can provide you with some referrals.

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