How It Works
A Self-Directed IRA LLC is a retirement account that allows you to invest in almost any asset. It also gives you the possibility of an IRA LLC checkbook which can make transactions instantaneous and fee-free.
No. The LLC has to be specially constructed to conform with IRS rulings regarding the kind of entity that can hold retirement assets. Broad’s IRA LCC has been written by leading ERISA attorneys to ensure proper compliance.
Not always. An IRA LLC is great for assets that require a lot of maintenance, transactions, or special degrees of freedom. For a hands-off investment like a Private Placement, a standard Self-Directed IRA will be the better choice.
Yes, if your employer lets you. Often employer-sponsored 401(k) plans are locked in for the duration of your employment. Ask your HR manager for the details of your specific 401(k).
Yes. You can rollover almost any kind of account including a Roth IRA, SEP IRA, 403(b), and Keogh.
You can start with the following:
- IRC §4975
- IRS Private Letter Ruling 8241079 (February 25, 1982)
- Swanson v. Commissioner 106 T.C. 76 (1996)
- IRS Field Service Advisory 200128011 (April 6, 2001)
No. Any American taxpayer who earns income may open an IRA LLC.
Almost any kind of asset can be placed in an IRA LLC, including real estate and precious metals. The only two standard assets that can not be placed in an IRA LLC are life insurance and collectibles.
Yes. The specifics of the process vary from asset to asset.
No, that would be considered a Prohibited Transaction.
It works just like a regular checkbook. When you open up a dedicated LLC for your IRA, it can be utilized like any other small business. That means you can go to your local bank and apply for a checkbook for your IRA LLC. Then you can use that checkbook to handle all of your IRA LLC's transactions. That includes purchasing an asset and paying for any asset maintenance.
No. Similarly you can’t use personal cash to pay for expenses. However, you can use the debit card that is associated with your IRA LLC's checking account.
Broad works closely with Madison Trust, the industry’s highest-rated Self-Directed Custodian. However, you are always free to direct us to the Custodian of your choice.
There are three basic actions that require IRS reporting:
- Annual Valuation – This is an estimation of how much your IRA LLC is currently worth.
- Required Minimum Distributions – At age 72, the government requires account holders to start taking distributions.
- Annual Contributions – These are contributions that you made to your IRA account over the past year.
The way these actions get reported are with 3 different forms:
- Form 5498 – This form is filed by your Self-Directed Custodian. It lists the current value of your retirement assets and any contributions that you may have made.
- Form 1099R – This form is also filed by the Custodian in the event that a distribution was made.
- Form 990T – The account holder fills out this form in the case where there was relevant UBIT or UDFI.
No. Standard brokerages possess systems that are optimized for market products but not for alternative assets like real estate. Of course, occasionally there will be an exception. You can always ask your brokerage what their policies are.
No, each of you will require your own account. However, if you both possess IRA LLC accounts, those accounts can co-invest in one asset.
No. Your IRA LLC follows the same rules as a standard IRA.
- Taxes are deferred until the distribution is actually performed.
- At age 72 you will be required to start with RMDs – Required Minimum Distribution.
- If you take a distribution before 59 ½ years of age, penalties will apply.
The rules are the same as a standard IRA, but there are two situations that come up much more frequently with the IRA LLC. UBIT – Unrelated Business Income Tax – is when your retirement fund receives profit from an active business. If your IRA LLC owns an active business like a restaurant or goat farm, then you’ll have to pay yearly taxes. The second scenario is UDFI – Unrelated Debt-Financed Income. This comes about when you have a property in your IRA LLC that was partially paid for with a loan. The amount that can be attributed to the loan is subject to taxation.
No. The IRS does not allow you or those close to you to personally give or get benefits from your retirement assets. If you do, it is called a Prohibited Transaction. Common Prohibited Transactions include buying an asset from your parents or hiring your child to do work on an IRA LLC property.
Are you ready to move your investing forward?
Get going with an IRA LLC today.