I have $100K in a SEP IRA Opened and originally funded October of 2017 for my 2016 taxes returns (I had filed an extension). I would like to roll this over to a self directed IRA so that I can invest in real estate projects (by notes) that I am not involved in. I am also looking to max out my contribution for 2018 taxes ($53,000) however will most likely file an extension and will do this in September (2018 tax income is 1099). Can I do this in a IRA LLC?


Yes the SEP IRA can be invested in an LLC so it would be called a SEP IRA LLC.

Here is how it would work:

The SEP IRA would get transferred to a self-directed SEP IRA custodian like IRA Services Trust Company.

An LLC would then be formed solely for the purpose of investing the SEP IRA into it.

The SEP IRA would then get invested in the new LLC which would result in a SEP IRA LLC.

You would then place your alternative investments like real restate and notes through the newly funded LLC.

Here is a summary of the SEP IRA LLC Process:

  1. Register LLC with the Secretary of State
  2. Obtain employer identification (EIN)  for the LLC once the LLC has been registered with the applicable state
  3. Prepare SEP IRA LLC Operating Agreement
  4. Complete SEP IRA establishment forms
  5. Submit SEP IRA establishment forms with LLC operating agreement and investment authorization forms
  6. Open LLC Bank Account
  7. SEP IRA funds are wired to the LLC bank account
  8. The LLC bank account is funded and you can start processing investments

Ongoing Compliance

  • Going forward, you can contact us with any compliance questions as they relate to investing the LLC, or the SEP IRA regulations.
  • IRA  Services Trust Company, or the SEP IRA custodian that you select going forward will take care of the annual reporting with the IRS by issuing annual Form 5498.
  • You will need to provide to the SEP IRA custodian on an annual basis the fair market value of the LLC so that they can report the value on Form 5498.
  • Any contributions that you make on an annual basis which will be based on your W-2 wages, or if you later want to transfer more IRAs for former employer plans to the self-directed SEP IRA, will require those funds to be first deposited into the self-directed SEP IRA with the IRA custodian. The IRA custodian would then wire the funds to the SEP IRA LLC bank account.
  • All the income generated form the SEP IRA LLC investments must flow back to the SEP IRA LLC bank account.
  • If you want to take a distribution of SEP IRA LLC funds, the funds first must flow back to the IRA custodian so that they can perform the required distribution reporting from the SEP IRA.
  • UBIT or UDFI may be owed from certain SEP IRA LLC investments and must be paid directly from the self-directed SEP IRA.

Lastly, both a SEP IRA and a solo 401k plan is for the self-employed; as such, you may want to consider looking into opening solo 401k plan and transferring the SEP IRA into it if you don’t employee any full-time W-2 employees in your self-employed business. One of the many advantages of a solo 401k plan over a SEP IRA  is that the solo 401k already comes with checkbook control so an LLC is not required like it is for a SEP IRA.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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