Financial Information
How to structure LLC for Use With Self-Directed IRA?
Question : How to structure LLC for Use With Self-Directed IRA?
I wish to open a self-directed IRA that owns an LLC that I control to invest in trust deeds and other non-conventional notes.
I know that I’ll have to set up a self-directed IRA through a custodian like Sterling Trust, Pensco or Trust Adminstration.
Question: I have a California LLC that is in my name. Can I update the operating agreement and then open the self-directed IRA that purchases the LLC? Or since the current LLC is in my name does it not “qualify” and I have to start a new LLC properly under the IRA’s name???
Any advice would be appreciated.
self directed ira
Best answer:
Answer by batwanda
While this is a great idea, it is a prohibited act. An IRA is prohibited from doing business. It can not own or contol an LLC. And, truthfully it should never own property, only notes.
If I get drunk and fall off your balcony, who do I sue, YOU the property owner or chase manhatten. Now, exchange the word YOU the property owner for IRA, the property owner..ooo invasion of the ira…bad bad bad…
So, back to the drawing board. You are thinking right (in a creative way, but if you could explain what you want to do with the LLC then maybe people can give you a better way to structure the deal.
Example, need money from the IRA for the LLC? Well, I dont think you can do it, however, if I need money for my LLC, your IRA could buy shares, it can own shares, it can not do business……
Excellent class on IRA self directed is given by peterfortunatodotcom and assets101dotcom,
Pete Fortunato and DYkes bodiford.
COnservative, wont get you in trouble.
GooD Luck
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#2 written by Valerie L 1 year ago
An IRA can only be owned by an individual, not a company or LLC. So I’m assuming you mean that you will title the IRA account in your name, and then buy a ‘security’ which would be interest in your LLC.
So to answer your question, you can’t buy your own LLC with an individual IRA. You could, open up a SEP-IRA and do some type of stock-option plan, where you give yourself stock each year. I would talk with your accountant on doing so. - Comment Feed for this Post
Wrong wrong wrong. It is not a prohibited act to invest IRA funds in an LLC, even one you own. And, the statement “it should never own property” is just dumb.
You can create (or use) an LLC where you act as manager and the IRA invests as a member (e.g., Member is Bank Name as Custodian for Segriest IRA). What is prohibited is that you are not allowed to get paid by your IRA to manage it, it can not loan you money and a few other rules you need to know about. Hedge funds are generally LLCs and people invest IRA assets all the time.
First, you need to know if California recognizes a single-member LLC as a separate entity. If not, you need to form an LLC in a state that does.
You can update the operating agreement but the headaches would be proving that any former business, and compensation, was terminated before you invested your IRA funds. The cleanest method is to start a new LLC.
Outside of the prohibited transactions (like being compensated), you also need to be aware that, if your LLC borrows money to invest, you may incur “Unrelated Business” Income Tax” (UBIT). While it is in an IRA, you may incur tax liabilities personally depending on how you invest.
Your best bet is to call Sterling Trust or Pensco (I think Sterling is better and cheaper) and ask if they can tell you how to structure your LLC. They want your business and will probably be more than happy to “suggest” some things without providing advice.