Limited Liability Corporation

Use a Self-Directed IRA to invest in Limited Liability Corporations

An LLC is a legal organization that provides the tax advantages of a partnership while limiting the legal liability of the individual partners in the same way a corporation does.
LLCs can be a great way to partner to purchase assets.  LLCs are considered securities in some states and may be required to meet the standards of securities offerings.
Purchasing nontraditional assets with a self-directed IRA can help you diversify your investments, which may guard your retirement portfolio against economic changes. Investing in an LLC is just one of the many options available with your self-directed IRA.

CamaPlan offers you:

  • First-hand, expert knowledge. CAMA taps into the wealth of experience of our local experts to bring you information in an easy to understand format.
  • Simple processes. Since we do this every day, we have simplified our processes so that you can quickly and easily take care of your transactions.

The following are LLC investment structures you can consider:

  1. Single member LLC or corporation where the IRA owns/is 100% member/shareholder of the entity.  An Attorney opinion letter prior to funding this type of investment.
  2. Multiple member LLC or corporation where the aggregate ownership of the entity is composed, 50% or more, of IRA accounts owned by disqualified persons, and the IRA holder or other disqualified person acts as the manager for this entity.
  3. Multiple member LLC or corporation where aggregate ownership of the entity is composed, 50% or more, of IRA accounts owned by disqualified persons and/or disqualified persons’ investment of non-IRA funds, and the IRA holder or other disqualified person acts as the manager for this entity.
  4. In addition to 1 through 3 above, the term “High Risk Investment” shall also include entities where the controlling interest is held by a disqualified person or persons. Such controlling interest shall be defined as the aggregate of all disqualified persons      participating in the entity.

Investing in a LLC

LLC Diagram

There is a big temptation in having your IRA funds in a checking account that you control, and for this reason the IRS may look at these investments more closely.

Important Things to Consider:

  • 100% of the funds are for the use of the IRA and its assets.
  • There can be absolutely no “self-dealing” with regards to the assets purchased or services provided to the asset.
  • Annual contributions to the IRA must still go through the self-directed IRA Administrator.
  • The LLC must be able to conduct all its  business within the limitations of the cash available within the account without involving disqualified persons or your personal funds.

Frequently Asked Questions:

Q: Who is the manager and who is the member of the LLC in my IRA?
A: You are the manager of the LLC which means you write the check and the IRA is the member which means the IRA owns the LLC.

Q: How do I know if an LLC is needed for the investment I would like to make?
A: The best way to know if an LLC is the right fit for your IRA would be to contact our office at [email protected] or 866-559-4430.

Q: What are my responsibilities if my IRA is invested in an LLC?
A: Some of the responsibilities of managing an LLC within your IRA are filing tax returns for the entity, filing annual reports, and paying reporting fees to the Secretary of State. Filing 1099s or other IRS reports may also be necessary. Remember to keep in mind that the requirements for an LLC owned by your IRA are the same as any other business entity.

Q: An LLC owned by your IRA sounds like a lot of work. Is there another option to make my investment?
A: Yes, your IRA can make an investment into an asset directly (i.e. real estate) without involving an LLC.