Investing in LLCs & Trusts

Purchasing non-traditional assets with a self-directed IRA can help individuals diversify their investments, which may guard retirement portfolios against economic changes. Investing in LLCs and trusts is one of the many options available with a self-directed IRA.

An LLC is a legal organization that provides the tax advantages of a partnership while limiting the legal liability of the individual partners in the same way a corporation does. Forming an LLC can be a great way to partner in purchasing investments.

Common reasons LLCs are used in self-directed accounts:

  • Small groups of investors to pool funds together.
  • Good option for families or business partners.
  • Investors have multiple transactions (rental property, rehab work, many expenses).
  • Checkbook control

Watch this video to learn more about investing in multi-member LLCs using your self-directed IRA

FAQs on Investing with LLCs using a Self-Directed IRA

What is an LLC?

An LLC or Limited Liability Corporation is when an IRA becomes the member in a legal organization that provides the tax advantages of a partnership while limiting the legal liability of the individual partners in the same way a corporation does.

Why would I want an LLC to invest with my IRA?

An LLC might also be set up so investors with multiple transactions (rental income, rehab expenses, etc.) can avoid processing time and check fees with checkbook control. An LLC also allows a small group of investors to pool funds together to invest.

Can I invest with disqualified persons?

If this is a new LLC, the IRA can invest with Disqualified Persons. The percentages of ownership cannot change once the LLC is funded. For existing LLCs, if any and all Disqualified Persons are less than 50% owner, the IRA can typically invest but the client should check with a tax advisor.

Can Midland set up the LLC for the client?

Yes, Midland can set up a Single Member LLC (Midland is the sole member) for a client for a fee. The LLC will be established in the state where the client retains residence. If the client wants the LLC set up in another state, they will need to have a Registered Agent who lives in that state. The client provides us with the intended name of the LLC.

What do I do to set up an LLC for my IRA?

Contact us to set up your LLC and we’ll make certain that it’s done correctly. A bank account must also be established in the name of the LLC as this will be the only place Midland can send funds. The LLC must obtain an EIN that will be separate from the member EIN.