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Occasionally, we get asked if limited liability companies (LLCs) are allowable investments for Self-Directed IRAs. The answer is yes – and they are frequently excellent vehicles for Self-Directed IRAs, depending on the circumstances. They allow for more direct control of IRA assets, and it is even possible to set up a checking account in the LLC’s name to handle transactions made by the IRA.
An LLC within a Self-Directed IRA can also help facilitate joint ventures – if you do not have the assets within your Self-Directed IRA to purchase the entire property, and you do not want to or cannot get a mortgage, your LLC within your Self-Directed IRA can be a partner in the investment along with other entities not related to the Self-Directed IRA at all.
The IRA can be a member in an LLC that is jointly owned by multiple partners. This is frequently the case when Self-Directed IRAs take ownership positions in closely-held family businesses and farms, or when buying apartment buildings and commercial real estate properties.
LLCs within IRAs also may require additional care and due diligence on the part of the Self-Directed IRA owner – especially in the case of single-member LLCs.
Here is what Self-Directed IRA investors should bear in mind when considering investing Self-Directed IRA assets in an LLC:
Violations of these prohibited transaction rules could result in the IRS disallowing your IRA, potentially causing severe unwanted taxes and penalties.
LLCs in self-directed and Self-Directed Real Estate IRAs can be invaluable in establishing limited liability – thus helping wall off other assets in the IRA from being seized by creditors with claims against the property or asset within the LLC. But investors should use extreme caution – particularly when using the ‘checkbook control’ technique. This is an advanced strategy that should only be undertaken with the assistance of experienced tax and legal counsel.
Interested in learning more? Contact TurnKey IRA at 844-8876-IRA (472) for a free consultation. Download our free guide or visit us online at www.turnkeyirallc.com.
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