No one gets into a Self-Directed SEP IRA for less flexibility. They choose to self-direct because they know it will have all sorts of positive benefits. It will help them expand their potential retirement assets to include real estate, precious metals, private companies, and more. It will help them make their own retirement decisions. It will give them investment options beyond stocks and bonds. But there’s one particular option for SEP IRA investing that can put your flexibility into hyperdrive: a Single Member LLC.

Using a Single Member LLC within a Self-Directed SEP IRA can be powerful because it gives the LLC a checkbook, which in turn goes into your hands as the owner of the IRA. This means you can make retirement investments with the power of a check. You’re not constantly asking for custodian approval for your transactions—you’re simply making them. And if that’s the kind of flexibility you want in your retirement investing strategy, here’s what you’ll need to know.

Understand the Basics of the Self-Directed SEP IRA LLC

Let’s rewind. What brings you to the SEP IRA? A SEP IRA (Simplified Employee Pension Individual Retirement Account) is a retirement plan designed for small business owners and the self-employed. It allows for higher contribution limits compared to traditional IRAs, making it an attractive option for anyone looking to save more for retirement. And why Self-Direct? By self-directing your SEP IRA, you can invest in a broader range of assets, including real estate, private businesses, precious metals, and more.

Adding an LLC to this setup—often referred to as a Self-Directed SEP IRA LLC—provides even more control. With this structure, you can make investments directly from your LLC’s bank account. You’ll have more direct control to buy retirement assets.

Choose the Right Custodian

The first step in setting up a Self-Directed SEP IRA LLC is to choose a custodian that specializes in self-directed accounts. Traditional financial institutions typically don’t allow investments outside of stocks, bonds, and mutual funds, so you’ll need a custodian that supports alternative assets. (Hint: call us biased, but we recommend checking out American IRA.)

Open a Self-Directed SEP IRA Account

Once you’ve chosen a custodian, the next step is to open your Self-Directed SEP IRA account. Ask the custodian for help if you need it. This involves completing the necessary paperwork and making your initial contribution. Your custodian will guide you through the process, ensuring that your account is set up in compliance with IRS regulations.

Form Your LLC

After your SEP IRA is established, you’ll need to form an LLC. Your SEP IRA will own the LLC and act as the “Single Member” of it, which keeps the LLC as the investment vehicle for your retirement funds. There are a few requirements here. You’ll need to file articles of organization with your state’s business registry and create an operating agreement that outlines how the LLC will be managed.

Your operating agreement is a critical document, as it must comply with both state law and IRS regulations. It’s advisable to work with a legal professional who understands the intricacies of Self-Directed IRA LLCs to ensure your operating agreement has the proper structure.

Once you’ve formed the LLC, you’ll need to fund it with your SEP IRA assets. This is done by directing your custodian to transfer funds from your SEP IRA into the LLC’s bank account. With the funds now in the LLC, you have the flexibility to make investments directly, using the LLC’s checkbook.

Want to know more about setting up a Self-Directed SEP IRA to get maximum flexibility in your retirement account? Reach out to American IRA at 866-7500-IRA.