Real Estate Investing Using an IRA LLC

This account structure is known as a single-member limited liability company (LLC), which gives the self-directed IRA owner “checkbook control” of funds in the account.

This account structure is known as a single-member LLC, or commonly known as a checkbook IRA, which gives the self-directed IRA owner “checkbook control” of funds in the account. You do not have to form an LLC in your IRA to invest in real estate, but those who use single member LLCs have immediate access funds, can complete transactions quickly in competitive markets, and may avoid some administrative costs incurred by a typical self-directed IRA.

In the checkbook IRA scenario, the IRA is the single member of the LLC, and the IRA owner, acting as manager of the single-member LLC, is able to write checks directly out of the self-directed IRA to make investments. While these accounts offer great benefits and flexibility in real estate investing transactions, the same regulations that govern IRAs apply to these LLCs, as well. The IRA owner must avoid prohibited transactions and dealings with disqualified persons in order to remain in compliance with IRS guidelines. The IRA owner is also prohibited from commingling non-IRA funds within the LLC and is prohibited from taking any compensation for managing the LLC.

It is important to understand that IRA LLC transactions require a great deal of accounting and the IRA owner is responsible for keeping complete and accurate records. Forming an LLC creates an additional cost and entails a supplementary set of rules that must be followed. Advanta IRA strongly encourages an individual considering this type of set-up to consult with your attorney, CPA or other financial professional to determine if using an IRA LLC is right for you.

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