When the Employee Retirement Income Security Act (ERISA), passed in 1974, banks and investment firms became the most prominent lobbyists for IRAs. 

Since the beginning, there has been a common misconception that IRAs only allow investments in stocks, bonds, mutual funds, annuities, and CDs.

However, once again, this couldn’t be farther from the truth.

The primary reason you haven’t heard of the IRA LLC before is that traditional IRA companies aren’t financially motivated to inform their clients how to make investment decisions outside of stocks, bonds, mutual funds, and annuities, and CDs.

However, in 2000, following the stock market collapse following the “Dot Com Bust,” it created a market for “truly self-directed IRAs.”

Most traditional retirement plans can be transferred to a new custodian and structured into a New Standard IRA LLC (aka, the IRA). The most popular retirement accounts which are eligible are listed below.

However,… 

Before committing to the set up of a New Standard IRA, check with your retirement plan’s current custodian to ensure your account is transfer or rollover eligible. Once you confirm your eligibility, we can assist you. 

Here is a shortlist of the traditional retirement accounts that allow you to convert into a New Standard IRA (IRA LLC).

• Traditional IRA
• Roth IRA
• SEP IRA
• SIMPLE IRA
• Thrift Savings Plan
• 401(k)
• 403(b)
• 457

The IRA LLC is a uniquely-structured IRA company owned by your IRA account.

The IRA LLC is a specially structured business entity, which allows you to manage your IRA funds and investment decisions directly … all without the custodial meddling and interference.

As an added benefit, you, as the non compensated entity manager, also receive checkbook writing privileges of the funds inside the IRA LLC.

The IRA LLC is the best choice for IRA investors seeking to control their IRA and financial destiny.

You can manage and direct your funds at will, so long as you avoid investing with disqualified parties or commit prohibited IRA transactions.

If you have been investing with a standard self directed IRA for any amount of time, you are fully aware of its limitations.

For example, depending on who you select (so select wisely) as your self directed IRA custodian, you aren’t allowed to invest in certain allowable IRA assets.

E.g., Let’s say you wanted to invest in bitcoin when bitcoin was $300. Although investing in bitcoin inside an IRA is not a prohibited transaction, many IRA custodians would’ve blocked you from making such an investment because it did not fit their investment paradigm.

As an investor, this sort of limitation can be extremely frustrating, especially when you have the funds available and are ready, willing, and able to make such a legal investment transaction.

Fortunately for you … setting up an IRA LLC finally resolves these sorts of frustrations and issues entirely. The IRA LLC allows you directly to transact ALL legal IRA investment transactions, including but not limited to the purchase of real estate, rental properties, bitcoin, other cryptocurrencies, physical gold and silver, and other allowable precious metals … all without the typical hassles related to corporate, custodial oversight and interference; bureaucratic red-tape; and an unfair, custodial fee structure. Read our article on The “Shocking Things” You Can Buy Inside Your IRA to learn more.

No! You are the manager of your self-directed IRA LLC, and you make all the decisions.

When you decide to invest with your IRA LLC, you can write a check, use your IRA’s debit card, or wire the funds directly for your investment. You are also authorized to sign all contracts.

Even though you are truly self directed, you are responsible for reporting to your custodian all the activities that transpire inside the IRA annually. In turn, they report your activity to the IRS on your behalf. 

We recommend maintaining a balance sheet for your IRA LLC entity and sending the balance sheet to the custodian annually.

If you want to hire another decision-maker for your entity, you are allowed to do so! 

Most IRA custodians don’t have formal documents to make this reporting happen. Usually, a standard letter will suffice.

You can acquire a loan for an IRA investment so long as you don’t obtain a loan in your name (in other words, extend credit to your IRA) or use the IRA as collateral for a real estate loan in the event you default. 

The guidelines governing prohibited IRA transactions clearly state…

(1) You cannot personally guarantee or extend credit to your IRA. 

(2) You cannot leverage your IRA as security or use your IRA as collateral for another investment. 

On the one hand, it may seem like borrowing money for an IRA investment transaction is more challenging, especially if you have never done it before. 

However, there is a solution, and it is what is known as a “Non-Recourse Loan.”

Some individuals use an IRA LLC property and not the IRA LLC itself as collateral. As long as the loan-to-value ratio meets the right requirements, most banks will lend money to the IRA LLC. 

Your IRA LLC advisor has established relationships in place to help you facilitate non-recourse IRA loans and transactions.

Gains derived from the transaction’s debt financing portion may be subject to Unrelated Business Income Tax (UBIT).

When in doubt, always complete your due diligence and hire a tax professional to assist you. Seeking professional guidance is critical to your success. The last thing you want to do is wing it! 

As we always say to our clients, “an ounce of prevention is worth more than a pound of cure.”

If you are concerned about UBIT and its impact on your investments, consult a tax professional before investing, and when filing your taxes to ensure all your I’s are dotted and all your T’s are crossed.

No! You should NOT apply for a credit card for your IRA LLC. Applying for a credit card for your IRA LLC would be considered a prohibited IRA transaction. 

As the IRA rules state, you cannot personally guarantee a credit line for your IRA and extend credit to your IRA. 

However, to expedite and facilitate transactions in your IRA LLC, you may apply for a debit card, which in turn is owned by the IRA LLC.

No! Purchasing an asset that you already own is considered a prohibited IRA transaction. Even if you attempt to sell personal a personal asset to your IRA at the current market value, that is a big no-no!

… Again, selling personal assets to your IRA is considered a prohibited IRA transaction by the IRS.

However, that is not the end of the story…

If you feel strongly about your case or a particular situation, you can file for an exemption with the Department of Labor (DOL). 

You should know before starting this process… Attempting to obtain a private letter ruling or an exemption from the DOL is well within your rights. 

However, filing for an exemption alone will not necessarily resolve your issue. There is “NO Guarantee,” the DOL will approve your exemption!! 

Even with the best legal counsel, it is challenging to receive an exemption from the DOL. Filing for a DOL exemption can be time-consuming and costly. 

DOL can ultimately reject your request for an exemption, leaving you with nothing to show for your time, money, and effort spent.

Contrary to the popular group-think among your typical average financial planners, evidence shows government agencies are well aware of the IRA LLC, and it is not “frowned upon” by the IRS. 

For anyone to propagate such fictional nonsense is flatly untrue.

If you are paying for this advice, your broker, CPA or attorney should not be making this mistake in misleading you.

Brokers and financial advisors will attempt to keep your assets corralled to continue to collect fees from you, which becomes more and more apparent – the more you speak with them.

You hire a CPA to help you file your taxes. 

You hire a local attorney for legal advice and to review your contracts. 

Neither of these professionals specializes in IRA LLCs as we do. 

Paid advisors generally won’t take the time to dig into the tax code just to give you answers to your tax questions for free.

Even though your financial planner may not be attempting to deceive you or put you off, they may, even in good faith, say off-handed statements without any basis in facts.

They may falsely claim…

• “That’s illegal!!!!”
• “What you are telling me sounds like an IRA prohibited transaction.”
• “Technically, you can set up your IRA like that, but it is frowned on by the IRS, and it may trigger an IRS audit.”
• “I think I read somewhere. The IRA LLC is part of the IRS Dirty Dozen list of tax scams.”
• “This is an IRS loophole, and the laws will change, so you are risking your retirement account by switching your account over.”

Time For a Dose of Reality 

Your financial advisor naturally will show skepticism when they realize you want to move your funds away from their corral of investments, mainly because “they know” if you transfer your account from them, they will … lose money …

So much for advisor objectivity and integrity, right?  

Being an experienced IRA facilitator, we have heard every conceivable excuse financial advisors give in an attempt to dissuade you from making a legitimate, lawful IRA transaction… 

Separating Fact From Fiction

Fiction: “If you set up an IRA LLC, you will more than likely trigger a taxable event, and your IRA will be taxed.” 

Fact: This statement is NOT true! You do not pay taxes on the transfer of funds from one custodian to another. The funds are moved safely and securely between custodians via a direct custodial wire transfer.

Fiction: “That company (meaning us) will likely take off with your IRA funds.”

Fact: This is NOT true either! 

We NEVER touch your money. 

As IRA facilitators, our role is limited to setting the proper expectations, guiding you through the process step-by-step of setting up your IRA LLC properly. 

In exchange for our done-for-you services, we charge a small one-time fee to facilitate the process for you. 

You are in control of the process and your funds from end to end. 

When you transfer your funds from one custodian to another, it is similar to moving your funds from one bank to another with a few technicalities thrown into the mix. 

When you work with New Standard IRA, your funds are transferred safely to a new Trust Company or Bank. We NEVER touch your money! 

Fiction: “That’s probably illegal.”

Fact: If you hear the IRA LLC structure is illegal by a financial advisor, challenge them and ask them, “Where in the IRS code is the IRA LLC structure properly structured explicitly called unlawful?”

Your advisor won’t find such gobbledygook written explicitly in the tax code because it is not there. 

Ask your financial advisor where within the tax code you can only buy stock with your IRA. 

You know what? 

Your advisors will never find that phrase written in the code. 

Why? Because it’s written there.

It is borderline malpractice to mislead you into believing this type of structure is frowned on by the IRS or any other government agency.

Nowhere is it indicated that the government doesn’t want you managing your retirement account. 

Fiction: The IRA LLC exists in a gray area or is a tax loophole.

Fact: To falsely state an IRA LLC exists in a gray area or a special tax code loophole reveals a misunderstanding of the term’s – “gray area” and “tax loophole.”

Gray areas are gray because the legal system hasn’t vetted a situation thoroughly yet.

However,… 

The IRA LLC structure’s legitimacy has been challenged in court numerous times and has survived legal scrutiny, even at the Supreme Court. 

Since that is the case, the IRA LLC does not exist in a gray area. Advisors giving this sort of misguided information need their gray matter examined. 

As for the myth of the IRA LLC being a legal tax loophole … a tax loophole provides an individual or an entity the “means or opportunity to evade the rules or the spirit of the law’s intent.” 

However, the IRA LLC does neither. Therefore, by definition, the IRA LLC is not a tax loophole.

The IRA LLC does not give someone the power to circumvent tax laws or the rules governing IRAs. On the contrary, a prohibited IRA transaction is still a prohibited IRA transaction. 

The IRA LLC perfectly aligns with the original intent and the spirit of the law governing IRAs as outlined in the IRS code, which ultimately places you in charge of your IRA investments.

Regarding a future IRS rule change, unless the financial professionals advising you are lawmakers in Congress, they don’t know with any certainty how the laws may change one way or another.   

If, however, you still believe the IRA rules will change and eliminate the IRA LLC in the future, then NOW may be the best time for you to take advantage of the freedoms offered to you in the IRS tax code, Right Now.

Since the passing of the ERISA Law in 1974, Congress has given you the ability to self direct your IRA. Still, most custodians have a vested interest in controlling your money and skimming profits from your account back into their pockets, not yours.

First off, we never touch your IRA funds. We only assist and facilitate your funds’ safe transfer from your current custodian to your new custodian and then ultimately to your IRA LLC bank account.

Your current custodian securely transfers your IRA funds to a registered, qualified self directed IRA custodian who understands and recognizes the IRA LLC entity. Your funds are held safely and securely in the new IRA account for a short period (usually less than a week).

Next, you fund your IRA LLC checking account. Once you fund your IRA LLC checking account, only you manage your account, and you alone have access to your funds. 

Note: For an IRA custodian to be qualified, the financial institution must meet stringent State and Federal requirements. E.g., For financial institutions to be deemed qualified, they are required to maintain adequate cash reserves. The Internal Revenue Code (IRC) Section 408 outlines the requirements.

With an IRA LLC, even if the trust company or bank your account is associated with goes out of business, you would be in a better position than those who didn’t have an IRA LLC set up.

Remember, you have exclusive access and control of your money. Second, you can quickly transfer assets held in your IRA LLC “in-kind” to a different IRA custodian without skipping a beat.

No, IRA LLCs cannot own interest in an S-corporation. 

More specifically, only U.S. citizens and U.S. residents are eligible to own shares in an S-corporation. Entities such as LLCs, Partnerships, Corporations, IRAs, etc., are NOT allowed to own shares in an S-Corporation.

The IRS definitively weighed in on this particular issue – see IRS Letter Ruling 199929029, April 27, 1999.

Yes. Individuals can contribute to a traditional IRA whether or not another retirement plan covers them. However, this individual may not deduct all of their contributions if an employer-sponsored retirement plan covers them or their spouse.

[Note that contributions to a Roth IRA are not deductible, and income limits apply.]

See IRS Publication 590 for further information.

When you invest with your IRA LLC, ensure… 

1. To purchase and title the assets in the name of your IRA LLC.
2. The IRA LLC pays the expenses.
3. All the revenue flows back into the IRA LLC.
4. To always make decisions that are in the best interest of your IRA because once you become an IRA manager, you become a fiduciary.

To get into the right mindset, visualize managing a deceased friend’s estate for his/her children instead of your own IRA.

You can convert a traditional IRA to a Roth IRA by:

Direct Rollover: 

You can transfer from a traditional IRA to a Roth IRA via a direct rollover. To complete the transaction, transfer your IRA funds to a Roth IRA within 60-days of initiating fund distribution.

Trustee To Trustee Transfer: 

The financial institution holding your traditional IRA assets will provide directions for transferring assets to a Roth IRA with another financial institution.

Same Trustee Transfer: 

An institution holding a standard IRA’s assets will provide instructions for transferring assets to a Roth IRA using a trustee-to-trustee transfer. 

An IRA conversion form requires a signature. When you convert an IRA to a Roth IRA and remain with the same trustee, the conversion process is much easier because the transfer takes place at the same financial institution.

As part of the Roth IRA conversion, the IRS will tax any untaxed amounts from the traditional IRA. Form 8606 for Nondeductible IRAs reports the IRA conversion. 

Yes, you can. In Swanson vs. Commissioner of Internal Revenue Services, James Swanson created a special purpose entity or company for his IRA. 

He appointed himself as a non-compensated director of the company. 

As the director of the company, he received checkbook control over the entity. 

Swanson partnered his IRA with his three children’s IRAs.  

The IRS challenged Swanson’s entity, but the courts ruled in Swanson’s favor.

A Further Note About IRA LLC Capitalization

Regardless of eligibility, suppose more than one individual owns your IRA LLC, as in the Swanson case. The IRA LLC would NOT be eligible for any additional outside IRA capitalization. 

However, when your LLC is owned 100% by a single IRA, you ARE allowed to make ongoing, annual contributions to the entity (See DOL Advisory Opinions 97-23A and 2005-03A).