- List the IRA LLC as the lender/beneficiary;
- List the borrower;
- List whether the note is secured or unsecured;
- List if the note payment terms–for example, interest only with a final balloon payment, or principal and interest; quarterly or monthly payments;
- List the consequences in the even note default; and
- you sign as the manager of the IRA LLC and the borrower also signs.
Note vs Equity Investment
Self-Directed IRA LLC Note Investment FAQs:
Lend to Real-Esate Flipping Business QUESTION:
No as long as neither your nor certain family members (e.g., spouse, parents, children, etc.) are the owners of the business, and it is not an equity investment but rather a promissory note investment. As mentioned above, even if the borrowing entity invests does business activity, UBIT will not apply to the ROTH IRA LLC note investment. interest income attributable to your IRA’s promissory note investment is not subject to UBIT provided that the interest is not tied to the underlying performance of the investment (i.e. the flip).
Lend to My Personal LLC QUESTION:
No. Reason being, in addition to the account owner falling under the disqualified party umbrella, this same rule applies to the IRA owner’s spouse, children, parents and entity that he or she controls or has a personal ownership in. This rule applies regardless if the loan is at a fair market interest rate. Such transaction would be considered a prohibited transaction per the following section found in I.R.C 4975:
- “Lending of money or extending credit between a plan and a disqualified person.”