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Checkbook Control IRA

 
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Checkbook Control can provide flexibility and closer control of self-directed IRA funds.

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Checkbook Control IRAs can buy Single or Multiple Member LLCs.

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Checkbook Control IRAs require more involvement and responsibility on behalf of the IRA holder.

What is a Self-Directed Checkbook IRA?

  • A Checkbook IRA is sometimes referred to as a:
    • "Checkbook Control" IRA,
    • Checkbook LLC, or
    • Single Member LLC.
  • A Checkbook Control IRA shifts direct access to IRA cash and assets from the IRA provider to the account holder.
  • Account holder can then write checks using IRA funds.
  • This level of control is achieved by the IRA buying 100% share of an entity (often a Single Member LLC) that the IRA holder then manages.
  • Checkbook control can provide some flexibility when it comes to investing your IRA funds.
  • A Checkbook IRA also requires greater responsibility on behalf of the IRA holder.

Benefits of a Checkbook Control IRA

  • Speed with which you can disburse funds from your IRA
  • Possibility of lower IRA provider fees
  • Ability to invest in any asset that the IRS allows
  • Easily move LLC assets to the IRA for distribution

Self-Directed IRA Educational Videos

Introduction to Checkbook IRA Investing Webinar

Are you looking for more control and flexibility over your retirement funds? The Checkbook IRA may be a solution. This webinar explains what a Checkbook IRA is, how it works, and the rules at play when choosing to invest your IRA using this type of structure. We'll discuss the benefits as well as pitfalls for the IRA holder to help you better understand if an LLC is right for you.
 
 
Watch Webinar Now  

More About Checkbook IRAs

Checkbook Control IRA - Important Things to Know

 
  • As the manager of the Checkbook Control IRA/Single Member LLC, you are responsible for the legality of your LLC's actions and its adherence to IRS rules regarding your self-directed IRA.
  • Responsibility for the bookkeeping shifts from the IRA provider to the Checkbook IRA holder/LLC manager.
  • Titling on asset documentation is in the name of the IRA owned-entity, not the IRA itself.
  • All IRS rules associated with the IRA must be followed, even with the Checkbook Control structure. Keep in mind, you may exercise extreme diligence when managing your Checkbook IRA, and still be at risk for IRS sanctions.
  • The IRS prefers to have a buffer between the IRA holder and the IRA's assets. Usually, this is the self-directed IRA provider. This structure, however, circumvents that arrangement. This is why New Direction IRA requires an Attorney Opinion letter.
  • IRS Form 5498 , which is filed annually for every IRA account, does specify investments in private corporate entities.
  • Swanson vs. the Commissioner is the court case that most people reference when discussing the legality of this arrangement.

Checkbook Control IRAs

  • Checkbook IRAs that are 100% owned by a single account are commonly established as Single Member LLCs, but can also be formed as C-corporations, trusts, as well as other structures.
  • In scenarios where multiple self-directed IRAs or partners are involved and Checkbook IRA ownership is divided, multi-member LLCs, C-Corporations, or other partnership structures may be used.
  • It is important to share a discussion with your legal counsel to determine which structure is best for your situation. 


Rules and Responsibilities for Checkbook IRAs with New Direction IRA

It is the self-directed IRA holder's responsibility to create the single member LLC or other entity.

  • The IRA holder can have a professional perform this task, or they can do it themselves.
  • The IRA holder is responsible for adhering to all state laws that apply to the location where the LLC is created.
  • The entity document must not contain language that disallows ownership of shares by an IRA.

As the manager of your IRA's LLC, you must file tax returns for the entity, file annual reports, and pay reporting fees to the Secretary of State.

  • Filing 1099s or other IRS reports may also be necessary.
  • Keep in mind that the requirements for an LLC owned by your self-directed IRA are the same as any other business entity.

At the time the IRA makes the investment, the IRA must be buying "vacant" shares of stock or percentage of ownership.

  • The IRA cannot buy shares of stock or ownership percentage already owned by the IRA holder or any disqualified person(s).

You must have an Attorney Opinion letter.

  • The Attorney's Opinion Letter must affirm that according to IRC SSC 4975, the funding of this structure does not constitute a prohibited transaction.

Taking a distribution directly from your entity is a prohibited transaction.

  • Distributions must go through New Direction IRA so we can record the distribution properly.
  • Entity assets can be moved from the entity back into the self-directed IRA.
  • There may be no compensation paid to the manager or trustee of the entity if the IRA holder or disqualified person is the manager.

Step-By-Step Guide to Checkbook IRAs

Step 1 Open and fund your account – It takes New Direction IRA one to two business days to open your account once your application is in the office. You will then fund the account with a rollover (such as a gold IRA rollover), transfer, and/or contribution. This may take several weeks, depending on your current custodian, so plan for that in your timetable.
Step 2 Create the entity.
Step 3 Fill out a Buy Direction Letter and assemble entity documentation. Submit these to New Direction.
Step 4 Name yourself manager of the entity - Take the funding check and the entity documentation to a bank. Open a checking account in the entity's name.
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