Single-Member LLC – Checkbook IRA
Checkbook Control With a Single-Member LLC
Single-Member LLCs/Checkbook IRAs Are:
- Great for sophisticated investors
- Perfect for multiple assets
- Great for assets that have many expenses to be paid
- Easy to set up through Midland
An IRA can own a Single-Member LLC. Many times, this structure is known as a checkbook IRA or checkbook control IRA. These somewhat sophisticated investing structures have tremendous benefits to facilitate the investing processes. However, these accounts are complex. The plan owner must adhere to the rules of self-direction and rules of limited liability companies.
Many investors believe the benefits of a Single-Member LLCs are worth the additional work.
How Do Single-Member LLCs Work with a Self-Directed IRA?
Your IRA forms an LLC and is the only member of that entity. As the IRA owner, you may designate yourself as the LLC manager. Doing this allows you to set up a bank account in the name of the LLC. Funds are moved from the IRA and deposited into the LLC’s bank account. You now have checkbook control of the LLC. You can write checks from the LLC’s bank account to purchase investment properties.
Common Reasons Investors Use a Single-Member LLC for Self-Directed IRAs
- To enjoy the protections that typical LLCs offer with a bonus in gaining the freedom to invest. Single-Member LLCs can invest in alternative assets such as real estate and private lending.
- For quick access to investment funds, allowing timely acquisition of investment properties. Account owners don’t have to go through the IRA administrator to buy and sell property, which can take time. Checkbook control lets investors skip that step and purchase assets with funds already held in the LLC’s bank account.
- When investing in multiple properties, investing in the LLC allows the IRA owner to avoid multiple asset fee charges from the IRA administrator. Think of the LLC as being the only investment inside the IRA. Regardless of how many assets the LLC acquires, the IRA only recognizes the LLC as an investment when determining asset-based fee charges.
Single-Member LLC Manager Responsibilities
- You are required to keep thorough and detailed records on the LLC’s operations.
- You must know the rules governing self-directed investment accounts.
- Educate yourself on how to invest with and maintain your account in compliance with the IRS. If you don’t, you run a risk of incurring penalties and taxation. Your IRA may also lose its tax-sheltered status.
We strongly advise that you acquire help from a tax attorney, CPA, or other financial professionals to ensure the LLC is set up correctly and runs in compliance with IRS standards.
Clients of Midland receive one-on-one attention and service when investing in their Single-Member LLCs. We are here to give you the information needed to make an informed decision on your path to reaching financial freedom in retirement. We help to ensure your account maintains its tax-sheltered benefits to achieve that goal.