Good Day, I currently have IRAs with Schwab and Ameritrade. I own an LLC. I would like to set up a single self-directed IRA that I can fund real estate backed mortgages.
I have several questions that will direct my actions:
- QUESTION: is it best to set up a self-directed IRA thru Ameritrade since I already have accounts there?
ANSWER: It is our understanding that neither TD Ameritrade or any of the brokerage firms offer self-directed IRAs that may be invested in alternative investments such as a singled member LLC. Instead, you will need to open a self-directed IRA with a trust company such as IRA Services Trust Company that holds alternative investments such as LLCs.
- QUESTION: Is it best to set up a self-directed 401K through the LLC and transfer the IRA funds into it? Is this transfer tax fee?
ANSWER: Two common options are:
1). Open a self-directed IRA and then invest it in a newly formed LLC containing all the required IRA regulatory language (a previously established LLC is not acceptable as it won’t meet the newly established LLC requirement and, again, the new LLC must have specific IRA language so a Legal Zoom LLC will not suffice).
2). Open a self-directed 401k instead but only if you are self-employed. Click here to learn about the self-employment requirements. The self-directed 401k can then invest in alternative investments directly (e.g., real-estate backed mortgages), thus eliminating the need for an LLC.
Thank you in advance,
Josh in Texas