SEP IRAs have high contribution limits, which makes them popular with entrepreneurs with a lot of income to spare for investment. But when you look at the SEP IRA, why might they be a great vehicle for holding an LLC? We already know that LLCs within IRAs give you the opportunity to exercise “checkbook control” within the account, which makes investing much more speedy and flexible. But let’s look at the unique appeal of the Self-Directed SEP IRA and why it might be a good fit for anyone who wants that kind of flexibility out of their retirement account.

Simply put? A Self-Directed SEP IRA LLC is an appealing option for entrepreneurs and small business owners who want maximum control over their retirement investments. SEP IRAs already offer powerful advantages, true. But when paired with an LLC, their potential for flexibility and diversification expands even further. Let’s explore why holding an LLC within a Self-Directed SEP IRA might be the right move for those looking to take hold of their financial reins.

The Benefits of Checkbook Control in a Self-Directed SEP IRA

One of the key advantages of using a Self-Directed SEP IRA with an LLC? We touched on it earlier: the ability to gain “checkbook control.” With checkbook control, the account holder can make investment decisions and execute transactions directly. There’s no need to wait for the approval of a custodian.

As you might imagine, this eliminates delays in making timely investment decisions and allows for greater agility. Investors can jump on opportunities as they pop up, including real estate and private businesses and even precious metals.

Expanding Investment Opportunities

The way most people run them, the traditional approach to SEP IRAs limits your investment choices to standard options like stocks, bonds, and mutual funds. And there’s nothing wrong with those. But they may not provide the variety or potential for higher returns that some investors want.

By adding an LLC to a Self-Directed SEP IRA, account holders can branch out into a wider range of asset classes. This might include real estate, tax liens, private loans, startups, or even cryptocurrency. Essentially, the investor is free to build a portfolio tailored to their personal expertise and risk tolerance, opening opportunities that aren’t typically accessible in a standard retirement account. Even better, the checkbook makes it easy to invest in these alternative investments.

Asset Protection and Liability Shielding

Another advantage of pairing a Self-Directed SEP IRA with an LLC is the added layer of asset protection. It’s an LLC, after all. When assets are held in an LLC, they are generally protected from personal liability in case of lawsuits or other legal claims. This is particularly appealing to business owners and investors who want to protect their personal wealth from any risks associated with their investment ventures. By structuring their retirement assets through an LLC, they create a legal buffer that adds peace of mind.

Tax Advantages of a Self-Directed SEP IRA LLC

A Self-Directed SEP IRA already offers the benefit of tax-deferred growth. This means your investments to compound without the drag of annual taxes. When you combine this tax advantage with the diverse investment opportunities available through an LLC, you have a really powerful strategy for maximizing retirement savings. Any income generated within the LLC flows back into the SEP IRA tax-deferred, meaning that rental income from real estate or gains from other alternative investments won’t be taxed until you begin withdrawals in retirement.

Want to know more about why you might use an LLC within a SEP IRA? Or maybe kick off the process of opening one of your own? Reach out to us here at American IRA by dialing 866-7500-IRA.