IRA LLC FAQs


What is an IRA?

An individual retirement arrangement (IRA) is a custodial account used to hold investments for an individual’s retirement.


When were IRAs created?

After the passage of the Employee Retirement Income Security Act of 1974 (ERISA), IRAs were created by ERISA in 1975. Roth IRAs were created by the Taxpayer Relief Act of 1997.


Who offers IRAs?

IRAs are established with Insurance Companies, banks, credit unions, savings and loan associations, brokerage firms, or other organizations approved by the Internal Revenue Service (IRS).


What is a Self-Directed IRA?

A self-directed IRA (SDA) is an IRA that allows the IRA owner to pick the investments. Because the IRA trustee or custodian does not pick the investments, the IRA owner takes on the risk. Some of the investments that SDA owners direct their IRAs into are real estate, LLC and precious metals, to name just a few.


What is a Self-Directed IRA LLC?

Commonly referred to as a Checkbook IRA or IRA LLC, when an LLC is 100% owned by an IRA or combination of IRAs, it is referred to as a Self-Directed IRA LLC. While the IRA owns the LLC through the purchase of member units, the same prohibited transaction rules applicable to the self-directed IRA apply to the IRA owned LLC.


Why open a Self-Directed IRA LLC?

There are many reasons the self-directed IRA LLC is popular for investing retirement funds, including the following:

Alternative Investments

Since the early 2000s the self-directed IRA owned LLC has grown in popularity as the common form of entity for placing real estate purchases, tax liens, precious metals, trust deeds, promissory notes and private placements, to name a few.

Checkbook Control over the IRA

A self-directed IRA owned LLC puts the IRA participant in control in placing the self-directed investments as the named LLC manager. The LLC investments can be processed by check or wire and are titled in the name of the LLC, not in the name of the IRA.

Reduce IRA Custodian Fees and Timely Process Investments

After investing the self-directed IRA in the LLC, as the manager start placing alternative investment purchases by writing checks or wiring funds from the LLC bank account. As a result IRA custodian processing fees and holding fees are greatly reduced and hold times are eliminated.


How is a Self-Directed IRA LLC established?

First, a Self-Directed IRA is created by completing and signing the IRA plan agreement provided by the IRA custodian.

Second, the former employer retirement plan or IRA funds are transferred to the new Self-Directed IRA custodian.

Third, MySolo401k.Net drafts Self-Directed IRA LLC operating agreement including specific IRA regulatory language, registers the LLC with the state and obtains EIN for the LLC from the IRS.

Fourth, MySolo401K.Net assists the LLC manager in opening the LLC bank account at his or her local bank.

Fifth, LLC investment directive along with the LLC documents are submitted to the custodian who then invests the IRA funds in the LLC by wiring the funds to the LLC bank account.

Finally, after the LLC bank account is funded, the manager of the LLC begins placing alternative investment purchases.


How do I proceed with opening a self-directed IRA LLC?

Starting a self-directed IRA LLC is easy and we will guide you through the entire account establishment process.

Step 1: Complete the sign-up form by clicking here.

Step 2: After we review your online application, we will e-mail you to confirm receipt of your IRA LLC request.​

Step 3: After making payment, we will register the LLC with the secretary of state and obtain employer identification number for the LLC.

Step 4: We e-mail the self-directed IRA establishment forms and assist you in filling them out.

Step 5: We will assist you in filling out the IRA and/or qualified plan (e.g., former employer 401k, TSP, 403b or governmental plan) transfer-out forms.

Step 6: Mail the self-directed IRA establishment: Mail the self-directed IRA application to the new IRA custodian.

Step 7: Open the LLC bank account at your local bank.

Step 8: After the self-directed IRA has been funded, submit the IRA LLC Operating Agreement and investment forms to the new IRA custodian for funding.

Step 9: After the IRA LLC has been funded, begin placing investments by writing a check.


How long until my account IRA LLC is setup and funded?

The LLC funding process generally takes 7 to 14 business days.


Can I roll over/transfer my former employer retirement plan and/or IRAs into the IRA LLC?

Yes former employer retirement funds and/or existing IRAs may be transferred/rolled over to a self-directed IRA and subsequently invested in the IRA LLC. We will guide you through the entire transfer process.

IMPORTANT: SIMPLE IRA funds may not be transferred to an IRA LLC until two years has passed since the SIMPLE IRA was first funded. This is a SIMPLE IRA rule. See publication 590 for more on this

 

How much can I contribute to an IRA?

Fort 2013, the maximum you can contribute to all of your traditional and Roth IRAs is the smaller of: $5,000 ($6,000 if you’re age 50 or older), or your taxable compensation for the year.

Do IRA contribution limits apply to rollover contributions?

No the IRA contribution limits do not apply to transfers/rollovers from other IRAs or former employer plans such as a 401k.

Can I make IRA contributions after age 70 1/2?

It depends. You can make regular contributions to a Roth IRA after age 70 1/2, but contributions may not be made to a traditional IRA after age 70 1/2 even if you have earned income.

IMPORTANT: Transfers/Rollovers are not subject to the age 70 1/2 contribution restriction.

Can my spouse make IRA contributions even though he is not employed?

Yes, known as spousal IRA, you and your spouse can each make self-directed IRA contributions even if only one of you has earned income/taxable compensation.

I'm currently contributing to my full-time employer 401k, can I still contribute to a self-
directed IRA?

Yes.


 

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