IRA/LLCs - What You Need to Know - YouTube

Hi, I'm Mat Sorensen, attorney and author of The Self-Directed IRA Handbook, the most

widely-used book on self-directed IRAs.

Now, today we're going to be talking about the IRA/LLC, sometimes called a "checkbook

control IRA."

Now, an IRA/LLC is used by many self-directed IRA investors as a way to more efficiently

handle and invest their assets.

Now, it consists of two parts: First, a self-directed IRA; second, an LLC owned 100% by that IRA.

Now first, a self-directed IRA: If you have existing retirement plan money, but not a

self-directed IRA yet, the first step you'll need to do is find a custodian who allows

you to self-direct.

Who allows your IRA to invest in real estate, LLCs or other forms of alternative investment.

You'll roll your existing retirement plans over into that self-directed IRA.

Now, step two, is: We're going to have that self-directed IRA invest into the LLC.

It's going to own the LLC 100%.

It's going to invest an amount of cash in which you designate into the LLC.

This is a specific LLC: It's an "IRA/LLC."

It's very unique from regular LLCs.

There's provisions in these documents that are different than a regular LLC document.

This LLC is going to be used to actually own the assets.

So, rather than my IRA owning real estate directly, the IRA will own an LLC, the LLC

in turn will own the real estate.

Now, the LLC's going to have an LLC business checking account.

That's where the IRA money's going to get deposited for the investment from the IRA.

You can be manager of the LLC.

As manager of the LLC, you can manage the LLC business checking account, you can sign

for checks, receive income in the LLC business checking account.

When the LLC wants to go make investments, you can sign on contracts for the LLC as manager

of the LLC.

Now, keep in mind, you don't own this LLC; your IRA does.

You're simply acting as manager of the LLC, and manager of an LLC is like the President

of a corporation.

You're simply the person who can act on behalf of the company.

Now, there's a few things you cannot do as manager of the IRA/LLC.

First, you cannot pay yourself compensation, salary or any fees for being the manager of

the IRA/LLC.

Nor could you pay them to any other disqualified persons, like your spouse or children.

Second, you can't have use of the assets or benefit of the assets that the LLC owns.

And third, the funds in the LLC need to be separate from your personal funds.

Do not mix your personal bank account or personal assets or investments with the IRA/LLC.

Now, there's a few things you need to know when you actually operate your IRA/LLC.

First, keep in mind the LLC should be on title to any assets, not the IRA, not you personally.

The LLC will be on the deed to the rental property, or the LLC will be the lender on

the note, or whatever it is the investment you're making, the LLC is on title to that.

Second, the IRA/LLC, if it's owned 100% by your IRA, is considered a "disqualified entity"

for tax purposes.

That's nice because that means there's no tax return required by the IRS for the LLC.

You simply need to keep the LLC active with your state.

Lastly, remember: You don't own the LLC, your IRA does.

If you want to take money from the LLC, you need to first send the money from the LLC

back to your IRA and then you take a distribution from your IRA.

You can never take money for yourself directly from the LLC.

Also, when you're putting more money in, you're making new contributions, you cannot just

deposit it into the LLC.

Contributions need go first into your IRA, and then you'll invest those additional contributions

into the LLC.

Hey, hanks for watching.

I want to let you know about some additional educational materials to better help you take

control of your retirement.

Please check out my Self-Directed IRA Handbook and the accompanying video series.

I also have an annual Self-Directed IRA Summit that is recorded and available online virtually

at anytime.

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