There is a certain geographic footprint that comes with a Checkbook IRA LLC program. The IRA-owned LLC entity is formed in a specific state, after all.
If you move after setting up this type of program, you may need to make some adjustments to the entity.
How a move will impact your self-directed IRA will vary, depending on several factors. This can include where the entity was formed to begin with, what kinds of investments you’re making, and where you’re moving.
Below are some considerations for before you move — whether you’re planning on forming a new IRA LLC or operating with an existing plan.
Do Plan Investments Create Geographic Nexus?
Some types of investments are activities deemed by most states to create business nexus. Owning income-producing property or lending to residential homeowners are common examples.
If a LLC has nexus with a state, then it needs to be registered in that state to have compliance with state law and access to the courts of the state.
Registration can be accomplished either by domiciling the LLC in a state, or by registering a LLC formed in one state as a foreign entity to do business in a second state.
Many investment activities don’t generate state nexus. In that case, the LLC can be held in most any state.
Examples of these types of assets would include private placements or real estate syndications where the IRA LLC is investing in a legal entity. That entity will then have the necessary state footprint.
Exchange-traded investments such as conventional financial products, cryptocurrencies, and the like will not create nexus. Investments in foreign real estate don’t generate any US state specific nexus, either.
In most states, lending to commercial entities won’t trigger a need for in-state registration.
It’s always important to discuss topics of nexus with qualified legal counsel in the states where you have or plan to have activities.
When There is no Nexus
When nexus isn’t a concern, it’s unlikely you’ll need to make any structural changes to an existing IRA LLC if you change your state of residency.
An exception lies in situations where maintenance of a LLC the original state of formation is significantly more complex or expensive than your new state. There is a cost to moving a LLC, so you would have to evaluate the cost-benefit of such a move.
More commonly, you would need to update your address with all relevant plan vendors including the state, your IRA account custodian, and any counterparties to plan transactions like lenders, insurance companies, etc.
If you were listed as the registered agent for a LLC formed in your home state, then you will need to designate a new registered agent if you move out of state. The registered agent is a resident of the state or a state-licensed business other than the entity represented providing an in-state physical address for delivery of official notices or summons.
There are legal services companies that provide registered agent service for as little as $50 per year.
Designating a new registered agent is typically as simple as filing with the state business department. In states that capture such information, you’ll also want to provide your new address as the headquarters/mailing address. The fact that this address is out of state is not a concern.
When There is Nexus
If the investments you are making or plan to make with your IRA LLC generate nexus, then the considerations around where to form a LLC initially and what happens if you move will be driven by maintaining compliance with any state(s) where there is nexus.
Below are common pathways that may make sense:
- Leave the LLC in the existing state and just designate a new registered agent
- When nexus will remain in the original state only
- Leave the LLC in the existing state and register as a foreign entity in your new state
- When nexus will exist in both states
- Leave the LLC in place in the original state and form a new LLC in the new state
- When nexus will exist in both states and an additional desire for asset segregation is present
- Move the LLC from the original state to the new state
- When there will no longer be nexus in the original state and nexus will exist in the new stateIt’s possible there could be a delay in executing this type of move, making one of the prior options necessary on an interim basis
Example: FL Real Estate LLC
Laurie setup a Florida LLC for investing in a rental property in Lakeland. She received a job offer that require a move to North Carolina.
The Lakeland property owned by her IRA is performing well, and she doesn’t intend to sell it in the near future. She likewise doesn’t have any intention of purchasing an additional property in North Carolina with IRA funds.
Laurie will leave the LLC in Florida. She will designate a new registered agent and update the state with her address as manager.
Example – TX Real Estate LLC
Raj has an IRA LLC setup in Texas that holds a few rental properties. When he retired, he and his wife decided to move to Oregon to be near their grandchildren.
As part of his retirement, Raj freed up additional 401(k) money for rollover and wants to put that into some additional properties. He’d rather have them local to him.
He could either register the Texas LLC as a foreign entity to do business in Oregon, or form a separate LLC owned by the same IRA to split his Texas and Oregon holdings for reasons of asset protection.
Example – TN LLC in Syndications
Chad formed a LLC in Tennessee. While he originally held a rental property, he sold it and has been investing in apartment syndications. An opportunity in Georgia came up, and Chad decided to move.
He could keep the LLC in Tennessee, but the Volunteer state has a pretty hefty annual report fee of $300 and he would spend another $50 for a registered agent.
If he moves the LLC to Georgia, he will save $300 per year since an annual report is only $50 and he can act as his own agent. It makes sense for Chad to move his LLC to Georgia.
Life can change over time, sometimes in unexpected ways. If you’re considering a self-directed IRA LLC with checkbook control, it makes sense to put some thought into where the best location for LLC registration may be based on your long-term goals.
If you have an existing checkbook IRA plan, a personal move is an important event that requires some action to keep your plan in good order.
Making changes to a plan structure doesn’t need to be complex or expensive. Keeping proper state LLC registration in place, however, is critical for maintaining the effectiveness of the vehicle.