Last Updated on November 9, 2020
IRA Financial’s Adam Bergman Esq. discusses the Self-Directed IRA operating agreements, LLC articles and Tax I.D. numbers – the three major components for setting up a Checkbook Control Self-Directed IRA LLC.
In this Podcast
Obviously, when you start a retirement account, such as a Self-Directed IRA LLC, there are a few things you need to do. For most plans, like a workplace 401(k), it’s simply a matter of signing up, choosing your contributions and investments. However, if you want checkbook control of your funds, there are some other things that need to be in place.
A special purpose LLC, Limited Liability Company, is set up, which is owned by your IRA and run by the manager of the plan, you. All investments made with a Checkbook Control IRA LLC are made in the name of the IRA and not you. This gives you some anonymity and privacy. Further, custodian fees can be lessened, since they are less involved with your IRA transactions. Lastly, since you are control of your investment choices, the speed in which you can make them is dramatically increased. This is because you never have to have custodial consent when you have checkbook control over your IRA.
An LLC can be set up in any state. Generally, if you are a real estate investor, it’s best to set up the company in the state where you will be making the investment. You pay a couple hundred bucks to start an LLC with annual fees for the company, which vary by state.
The Self-Directed operating agreement should fit the needs of your LLC and also adhere to the IRS rules for IRAs. An operating agreement is needed by the IRA custodian and the bank where your account will be held. Usually, the custodian, such as IRA Financial, will prepare the agreement for you.
Further, you will need a Tax I.D. number for the LLC. You can go online to acquire an Employee Identification Number. This EIN is required by the IRS. The system is a little antiquated, since it says the rep doing the filing is the sole member, even if you are not the sole member. In this case, the IRA would be the member of the LLC, and not yourself. Again, this is why you need the operating agreement.
So long as you have these three important documents, you are ready to invest with your Self-Directed IRA. Of course, if you don’t want or need checkbook control, things are a bit less complicated. However, if you make lots of investments, or need the use of your IRA funds in a timely matter, checkbook control is the way to go.
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Join us next episode as Mr. Bergman discusses how to buy and hold gold in a retirement account.