IRA Owned LLC For Real Estate InvestorsGet a Consultation
The IRA-owned LLC is used for Checkbook Control. The IRA is the sole owner of the LLC and you, as the IRA owner, are the Manager of the LLC. This set-up allows for the IRA owner to directly control their investments without oversight or approval of a custodian. The IRA-owned LLC is formed by filing a Certificate of Formation with the Secretary of State. Then an Operating Agreement is created designating the IRA as the owner and you as the Manager of the LLC. The IRA will officially “own” the LLC, but you will control it. The Operating Agreement is also required to have restrictions to ensure that certain prohibited transactions do not take place.
Would you like the power to make almost any investment you want with your retirement dollars? This is possible, but many custodians don't want you to know that. In the often complicated world of retirement options, it's no surprise that there are some amazing ways to invest for your golden years that most people are not aware of. This is particularly true of the lesser-known, but extremely powerful IRA-Owned LLC, also known as the Self-Directed IRA LLC. The effectiveness of this tool lies in the fact that you remain in control of your investments without being the nominal owner of the account. Although the IRA does officially own this type of LLC, as the account holder, you will direct its use as the "Manager" of the structure. The appeal of the Self-Directed IRA LLC lies largely in the fact that it gives you greater investment freedom. You will no longer be bound by the rules and regulations of a traditional IRA custodian, nor will you have to waste time waiting for a custodian's approval to make an investment transaction.
Benefits of the IRA-Owned LLC For Investors
Real estate investors have the experience and knowledge to enjoy great success with an IRA-owned company. This entity boasts a massive variety of benefits that our clients love. Here are some of the most popular perks of the Self-Directed IRA LLC:
- Checkbook Control. You have total authority over your account, unlike a custodian-controlled account. As a business entity, the Self-Directed IRA LLC typically has its own checking account for all related transactions.
- Investment Freedom. With a Self-Directed IRA LLC, you are free to invest in both traditional and nontraditional investments. Traditional investments are things like stocks, bonds, and mutual funds, which you may already hold in a Traditional IRA account. Nontraditional investments are where investors can really get creative. For most of our clients, the Self-Directed IRA LLC's ability to hold real estate is a major draw. There are, of course, certain types of investments that the IRS does not allow. These include things like collectibles, such as stamps or artwork.
- Roth options. If you are eligible for a typical Roth IRA, you are almost certainly eligible for the Roth Self-Directed IRA LLC. Many investors, small business owners, and self-employed individuals are drawn to the Roth IRA because account holders pay taxes upfront. This means that all funds inside of the account have already been taxed, and you won't have to pay taxes "on the back end" when you take your distributions upon retirement. With the Self-Directed version of a Rot account, you can pass these tax savings on to your investments as well.
- Asset Protection. Just like the Traditional LLC and Series LLC, the Self-Directed IRA LLC offers asset protection. Your investments are held within the Self-Directed IRA LLC structure rather than your own name. This means, if someone ever wants to sue you, you are not making it easy on them. The LLC structure isolates your assets, while you personally appear to not own anything. Learn more about this feature from our previous article on the Self-Directed IRA LLC's Asset Protection benefits.
- Creditor Protection. Should you find yourself filing for personal bankruptcy, the value of your IRA-owned LLC's assets will be protected up to $1 million.
- Inflation Protection. Nobody knows for sure what effects inflation will have on their investments, but diversifying your dollars into real estate or other physical investments can help protect your assets from inflation. There is no guarantee that $100 today will be $100 in five, ten, or even twenty years. Assets like real estate are less sensitive to inflation, which means the Self-Directed IRA LLC gives you a way to diversify your portfolio against this threat.
- Tax Advantages. All of the investments within an IRA-owned LLC grow tax-free until the account holder takes distribution. This includes real estate investments, which are notoriously costly in terms of taxes. When an IRA-owned LLC holds a real estate investment, the property owner gets to defer these payments and the savings can be massive. Note that you will eventually have to take distributions, but this isn't mandatory until you reach the age of 70 1/2. The Roth version of the Self-Directed IRA LLC is funded entirely with after-tax income, meaning you don't have to pay taxes on your distributions at all.
Many investors enjoy using an IRA-owned LLC simply to avoid the inconveniences of using a custodian. Account holders have direct access to their funds and don't need anyone's permission to make the investments of their choosing. Of course, this also saves time. Time can be a major factor with non-traditional investments like cryptocurrency, where the value can change dramatically in mere minutes or even seconds. There are, of course, many more benefits to using an IRA-owned LLC.
Why You Should Choose Royal Legal Solutions To Form Your IRA-Owned LLC For Real Estate Investments
We specialize in ensuring that the LLC formation and management is compliant with IRS, and we also have relationships with almost every custodian (uDirect, NuView, Kingdom Trust, and more) to ensure a smooth process. We also have banking and other contacts in place for you to set up, establish, and fund your new company all without ever leaving your home. Our experts will advise you on the best banking practices for your Self-Directed IRA LLC, as well as how to avoid prohibited transactions and their costly penalties.
Royal Legal Solutions offers a comprehensive bundle of services at a reduced cost to you. The IRA Owned LLC has upfront costs as well as yearly costs that are just like any other LLC. These fees vary from state to state but generally will include:
- a registered agent fee ($99/year),
- a Franchise Tax and Franchise Tax filing
- an annual fee ($300 on average), and
- ongoing corporate compliance fees.
We offer a full service for all of your IRA compliance and entity compliance to ensure that you are going to be on the right side of the law with your IRA Company and investments.
If you are ready to enjoy true investment freedom and watch your retirement dollars grow, contact Royal Legal Solutions about setting up your IRA-owned LLC today.