What makes you ready to invest with more flexibility and speed? It’s when you have the power of a checkbook. And with a Self-Directed IRA and an LLC, you can have the power of a checkbook within a retirement account. But let’s go a bit deeper. How does a Self-Directed LLC work, why should you consider one—and if you’re ready to set up your own, what should be your next steps? Here are the answers.

Why Choose a Self-Directed IRA LLC?

A Self-Directed IRA offers flexibility, sure. But adding an LLC to the structure takes that flexibility to the next level. When your IRA owns an LLC, you become the manager of that LLC. This gives you immediate access to your funds. And this “Checkbook Control” means you can write checks and make investment decisions without needing a custodian to facilitate every transaction. For investors looking to move quickly, especially in fast-paced markets like real estate, this can be an essential way to invest for retirement.

Step 1: Open a Self-Directed IRA

The first step in setting up a Self-Directed IRA LLC is to establish a Self-Directed IRA. Work with a qualified custodian here. Unlike traditional financial institutions that limit your investment options, Self-Directed IRA custodians allow for investments in alternative assets—including LLCs.

To get started, choose a custodian that specializes in Self-Directed IRAs and can handle the administrative complexities involved. Select a custodian with experience in LLC structures. They’ll be instrumental throughout the process. Once you’ve chosen a custodian, complete the necessary paperwork and transfer funds from an existing retirement account, such as a Traditional IRA or 401(k), into your new Self-Directed IRA.

Step 2: Set Up the LLC

After your Self-Directed IRA is funded, the next step is creating the LLC. Your IRA will own this LLC, and the assets of the LLC will belong to your IRA. Remember: these won’t belong to you personally, but to your retirement account, which belongs to you. This distinction is important for maintaining the tax-advantaged status of your retirement funds.

The process of setting up the LLC typically involves choosing a business name, filing articles of organization with the appropriate state, and paying the required fees. It’s critical to set up the LLC in compliance with IRS guidelines. Most importantly? You’ll want to create an Operating Agreement for the LLC, which outlines the management structure and identifies your Self-Directed IRA as the sole member of the LLC. You may want to work with a professional to ensure the LLC and its operating agreement meet all legal and tax requirements. It’s crucial to get this step right.

Step 3: Obtain an EIN for the LLC

Once the LLC is officially formed, it will need its own Employer Identification Number (EIN). The EIN acts as the LLC’s tax ID, separate from your personal social security number or any other business you may own. You can obtain an EIN by applying through the IRS website, and the process is typically quick and free of charge.

This EIN will be used when opening a bank account for your LLC, as well as for any tax reporting required by the IRS.

Step 4: Fund the LLC from Your Self-Dir

With your LLC established and EIN in hand, you’ll then direct your Self-Directed IRA custodian to fund the LLC. This step involves instructing your custodian to transfer your IRA’s assets into the newly created LLC’s bank account. The IRA will own the LLC entirely, and the assets held by the LLC are, in essence, the assets of your IRA.

Ready to get started? You can kick it off with Step 1 by giving us a call here at American IRA by dialing 866-7500-IRA today.