A Single Member LLC, or limited liability company, is a simple construct. It’s a company with one owner—you, in this case. And with that arrangement, you’d be amazed at what you can accomplish. For example, the simplicity of the setup means that these LLCs are “pass-through” entities for tax purposes, making them exceptionally easy for handling tax returns. But they have one additional advantage: you can hold one of these LLCs in a Self-Directed Roth IRA.

Why is that so beneficial, and if it is, why might you consider setting up one for yourself? Here’s what you’ll need to know about the benefits and advantages of setting up your Self-Directed Roth IRA LLC.

The Advantages of Setting Up a Self-Directed Roth IRA LLC

It’s a simple formula. With a Self-Directed Roth IRA, you can hold alternative assets—including LLCs. And with an LLC established in the account, your business can have its own bank account. This checking account then reverts to the holder of the IRA—which is you. In other words, setting up an LLC within your Self-Directed Roth IRA gives you the power of the checkbook when making retirement investments.

This is a gamechanger for a lot of people for one simple reason: flexibility. Rather than working through a traditional broker or even a Self-Directed IRA custodian for approval of your purchases, you’re making the purchases directly. If there’s a great opportunity in a real estate property, for example, you can use the checkbook control to make the investment within your account quickly and easily—potentially saving your retirement account thousands of dollars because you jumped at the change to make the investment at the right time. That’s not a guarantee that every transaction will save you money, of course. But it is a key consideration for anyone asking why an LLC can be so beneficial.

What You Need to Know About Setting Up Self-Directed Roth IRA LLCs

This arrangement is so convenient that it might set off some internal alarm bells. What if it’s too good to be true?

Well, it’s not. But if it does sound like a blank check to do whatever you want within a retirement account, it’s probably a good idea if we list some limitations:

• Set-up fees. Establishing an LLC that you then hold within a Self-Directed IRA does require some initial set-up fees. It’s a bit of paperwork to establish this maneuver. The advantage to arranging things this way is you can enjoy lower fees down the line—because there isn’t additional custodial approval required. But it does take a little bit of extra setup at the outset, which can seem prohibitive.
• The usual retirement rules still apply. Having a checkbook within your IRA can seem like a lot of power. But it doesn’t confer any power to break the rules. You’ll still have to keep within the bounds of retirement investing, which means you can’t use these funds to invest in life insurance policies, collectibles like wine and art, etc. And you’ll still have to avoid transacting with disqualified persons, which can be an extra temptation when you have the power of the checkbook.

And that’s it. If you are responsible in the way you approach your retirement funds and investing, you’ll have no problem making the most of a Self-Directed Roth IRA LLC. But where do you start? We think the best way to proceed is to get in touch with a custodian who can help with the complicated setup. Get in touch with us at American IRA by dialing 866-7500-IRA.