The Self-Directed IRA LLC (sometimes referred to as a Checkbook LLC) is a unique Limited Liability Company (LLC) created with specific language to meet the Internal Revenue Service and Department of Labor’s stringent requirements to ensure the integrity of the IRA. You can establish an IRA owned LLC to give yourself “checkbook control” over your Self-Directed IRA account. To establish an IRA LLC, please review the following information and complete the appropriate forms.
Establishing a Self-Directed IRA LLC
The Self-Directed IRA LLC (IRA LLC) must be a newly formed LLC that is clearly owned by the IRA. The IRA owner cannot use an existing LLC they personally own. The IRA LLC must be “Manager” managed, meaning the IRA owner is the Manager of the IRA LLC. Formation of the IRA LLC begins with completing the Self-Directed IRA LLC Intake Form to create the Articles of Organization for the entity. The Articles include the name of your entity, address, and the purpose of the IRA LLC. Preferred Trust Company will form the IRA LLC through the Nevada Secretary of State based on the information provided on the Self-Directed IRA LLC Intake Form.
Roles and Responsibilities
The IRA LLC is subject to the same prohibited transaction rules and regulations of an IRA, established by the Internal Revenue Service. Due to the the IRA owner acting in the capacity of the Manager of the IRA LLC, it is important to familiarize yourself with the IRA rules and regulations as you are solely responsible for the compliance of the IRA LLC. In general, as Manager of the IRA LLC you can sign contracts, analyze investments, write checks and perform administrative functions. As the Manager of the IRA LLC you cannot pay yourself a management fee or salary.
As the Manager of the IRA LLC, it is important to keep detailed records of the funds in-and-out of the IRA LLC bank account to maintain the integrity of your IRA. The initial cash/investment into the IRA LLC will come from the IRA established through Preferred Trust Company. As the Manager of the IRA LLC you must record all investments, expenses associated and income received in-and-out of the IRA LLC bank account. As the custodian (Preferred Trust Company) is responsible for reporting the value of the IRA (which includes the IRA LLC) annually to the Internal Revenue Service. This will require the Manager of the IRA LLC to report the Fair Market Value of the IRA LLC annually upon request of the custodian (Preferred Trust Company). If an IRA owner wants to make a contribution or take a distribution from the IRA this must be completed through the custodian (Preferred Trust Company) and not the IRA LLC.
Preferred Trust Company performs the duties of a directed custodian and does not provide due diligence to third parties on prospective investments, investment sponsors or service providers and does not sell investments or provide investment, legal, or tax advice.
Annual Maintenance Associated with the IRA LLC
IRA LLC company registration must be renewed annually with the Nevada Secretary of State on or before the anniversary date the IRA LLC was established. All expenses and revenue associated with an investment (i.e. IRA, LLC) owned by the IRA must be paid by either the IRA or the IRA, LLC to remain complaint with the IRS. You can elect to pay the registration renewal directly from the funds in the IRA, LLC or complete an Expense Authorization form to have it paid from your IRA cash balance. If you would like Preferred Trust Company to complete the annual registration renewal on behalf of the IRA, LLC, you must define this in the attached form and maintain an adequate balance in the IRA to accommodate a $200 Alternative Investment Transaction Fee, in addition to the renewal fees charged by the Nevada Secretary of State.
Fair Market Valuation Annual Submission
The IRA, LLC Fair Market Valuation (FMV) is used to assign or change the value of the IRA, LLC investment in your IRA. Preferred Trust Company requires the IRA, LLC FMV to be submitted annually no later than December 31 for each asset held in an IRA, LLC to ensure proper tax reporting of Form 5498 to the Internal Revenue Service (IRS).
Re-Titling Assets to the IRA LLC
If you set-up your IRA LLC with a pre-existing Self-Directed IRA account, the investment assets need to be re-titled to the IRA LLC by completing the IRA LLC Re-Titling Form. Depending on the investment type, you will need to ensure that any interest/dividends, capital gains, principal, etc. are made out to the IRA LLC.
An IRA LLC is not exclusive to managing alternative assets. If you have a separate IRA account that is used to invest in publicly traded assets, those assets can also be re-titled to the IRA LLC.