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The Self-Directed SEP IRA

Self-Directed SEP IRA

What is a Self-Directed SEP IRA?

A Self Directed SEP IRA LLC “Checkbook Control” structure is an IRS approved and Tax Court certified structure that offers one the ability to use his or her SEP IRA funds to make almost any type of investment on their own without requiring the consent of a custodian. Tired of being forced to invest in stocks or mutual funds? Have an investment opportunity, such as real estate or a business investment that you would love to make with your SEP IRA funds… then the Self-Directed SEP IRA LLC is your solution.

What is a Simplified Employee Pension?

Any employer can establish a Simplified Employer Pension, or SEP. An employer can maintain both a SEP and another plan. Annual contributions an employer makes to an employee’s SEP IRA cannot exceed the lesser of (i) 25% of compensation, or (ii) $69,000 for 2024. However, special rules apply when figuring out the maximum deductible contribution for a self-employed individual (typically 20% of compensation).

“Checkbook Control”

By gaining “checkbook control” over your SEP IRA funds you will gain the following advantages:

You will no longer have to get each investment approved by the custodian of your account. Instead, as manager of the SEP self directed IRA LLC, all decisions are truly yours. To make an investment, simply right a check and use the funds straight from your Self Directed SEP IRA LLC bank account.

For example, Jen, who is self-employed, has established a SEP Self Directed IRA LLC. Jen’s SEP IRA care of the custodian is the sole member of the LLC and Jen will be appointed as manager of the LLC. Jen has opened her Self Directed SEP IRA LLC bank account at a local bank. The name of Jen’s Self-Directed SEP IRA LLC is ABC LLC. Jen wishes to use her IRA funds to purchase a home from Jack, an unrelated third-party (non-disqualified person). Jack is anxious to close the transaction as soon as possible. With a Self Directed SEP IRA LLC, Jen, as manager of the LLC, can simply write a check using the funds from the ABC LLC bank account or can wire the funds directly from the account to Jack. Jen, as manager of the LLC, no longer needs to seek the consent of the custodian before making the real estate purchase. With a regular Self Directed IRA without checkbook control, Jen would likely not be able to make the real estate purchase since seeking custodian approval would have likely taken too much time.

Investment Opportunities

With a Self-Directed SEP IRA LLC, you will be able to invest in almost any type of investment opportunity that you discover, including: real estate (rentals, foreclosures, raw land, tax liens etc.), private businesses, precious metals, hard money & peer to peer lending as well as stock and mutual funds; you’re only limit is your imagination. The income and gains from these investments will flow back into your SEP IRA tax-free.

Low Custodian Fees

A Self-Directed SEP IRA LLC will help you save a significant amount of money on custodian fees. You no longer have to pay excessive custodian fees based on account value and transaction fees. Instead, an FDIC-backed IRS-approved passive custodian is used.

The custodian in the Self-Directed SEP IRA LLC structure is referred to as a “passive” custodian largely because the custodian is not required to approve any SEP IRA related investment and simply serves the role of satisfying IRS regulations; you can take advantage of all the benefits of self-directing your retirement assets without incurring excessive custodian fees and custodian created delays.

All the Passive Custodians we work with are FDIC backed and IRS approved. Once your custodian has transferred your retirement funds to the IRA Passive Custodian, the IRA Passive Custodian will immediately transfer your funds to your new SEP IRA LLC which can be opened at any local bank, where you as manager of the SEP IRA LLC will have checkbook control over those funds.

Investments Made Quickly

You will have the power to act quickly on a potential investment opportunity. When you find an investment that you want to make with your SEP IRA funds, as manager of the SEP IRA LLC, simply write a check or wire the funds straight from your Self Directed SEP IRA LLC bank account to make the investment. The Self Directed SEP IRA allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

Tax-Free Gains

All income and gains from the SEP IRA investments will generally flow back to your SEP IRA LLC tax free. Because an LLC is treated as a pass-through entity for federal income tax purposes and the SEP IRA, as the member of the LLC, is a tax-exempt party pursuant to Internal Revenue Code Section 408, all income and gains of the LLC will flow-through to the IRA tax free!

Direct Access

With a Self-Directed SEP IRA LLC Checkbook Control structure, you, as manager of the SEP IRA LLC, will have direct access to your SEP IRA funds allowing you to make an investment quickly and efficiently. There is no need to obtain approvals from your custodian, or deal with time delays in awaiting approval from your custodian or paying any review fees.

Limited Liability

Your SEP IRA will benefit from the limited liability protection afforded by using an LLC. By using an LLC, all your SEP IRA assets held outside the LLC will be shielded from attack. This is especially important in the case of SEP IRA real estate investments where many state statutes impose an extended statute of limitation for claims arising from defects in the design or construction of improvements to real estate.

Asset & Creditor Protection

The SEP IRA holder’s plan will be protected for up to $1 million in the case of personal bankruptcy. In addition, most states will shield a Self Directed SEP IRA from creditors attack against the IRA holder outside of bankruptcy. Therefore, by using a Self-Directed SEP IRA LLC, the IRA will be generally protected against creditor attack against the SEP IRA holder.


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