What is a Check Book IRA/LLC?
It is a combination of a Self-Directed IRA owning an LLC (Limited Liability Company) with you acting as the manager. We use an LLC because it is a business entity that is a cross between a corporation and a partnership and is the PERFECT investment vehicle for your IRA! There are no tax returns to file nor any meetings, minutes or resolutions required. We prefer a New Mexico LLC because there is NO annual fee or report to file.
The IRA will own 100% of the LLC and this makes it a “flow through” tax entity. This means the owner, or the IRA, pays the taxes. The LLC itself will not pay any taxes, rather, it’s the owner of the LLC that is liable. But in this case, the owner is your IRA. So, if the LLC has earned the profits they pass to the IRA and there’s no tax due until you take an IRA distribution.
After the set up costs, the annual fees to the custodian may be as low as $100. With the IRA LLC the IRA has only ONE asset, the LLC. The Kingdom Trust Custodial fee is only $100 per year regardless of the value of the account. Though the IRA has only one asset, the LLC may own dozens of assets. It’s like your IRA owning Walmart. You would have only ONE stock or asset but inside that one asset would be 4,000 stores. The same here except on a much smaller scale. You control the company (LLC) that owns and controls the assets, while your IRA owns and controls the LLC.
The LLC does all the investing so you have control over all the investment decisions. You must follow the guidelines of the specially prepared IRS compliant LLC Operating Agreement. You have very BROAD authority with the exception of buying Life Insurance or Collectibles and dealing with your immediate family. The agreement will be signed by you and the Custodian.
You no longer need to contact or notify the Custodian of investments because you now have 'Check Book Control' in your hand via your LLC Operating Agreement. This is why the Check Book IRA/LLC has become so popular with real estate investors as well as Tax Deed/Lien buyers. You can even buy property offshore or at auction. Another side benefit is the manager may hold cash or metals as an asset of the LLC.
The manager of the LLC may open a business LLC checking account locally. You now may write checks and as manager make instant investment decisions and sign all documents that may be required.
You simply have MORE immediate control to the IRA funds and as long as there are no “self dealings” it is perfectly legal. This has been around since 1996 but until recently it was mostly used for real estate investing.
Any gains on the investments of the LLC would incur no tax due until taken as a distribution by the owner. In addition, you may take assets that ARE NOT cash as a distribution if it is accompanied by a fair market valuation. This is so the proper value can be determined so the correct amount of income can be determined. If this is done then the asset would be taken as a distribution "in kind” and taxes would be owed the following April 15th on the appraised value of the asset distributed.
For more detailed information go to CheckBookIRA.com one of our Preferred Affiliates.
LLcCorpUSA is the designated facilitator for the LLC document preparation and state filing of the Articles of Organization for the IRA/LLC. LLcCorpUSA currently offers a deeply discounted pricing of $795 which is several hundred dollars less than most others in the industry. The complete package includes:
* Filing the Articles of Organization with New Mexico Secretary of State
* Appointment of the required Registered Agent including 3 years of annual renewal fees
* Preparation of the Trustee approved and IRS compliant IRA/LLC Operating Agreement
For questions please call 800-527-3110.