These terms all mean the same thing:
Self Directed IRA LLC | Checkbook IRA | Real Estate IRA
There are no differences in these terms. Over the course of time, different people and companies have used different terms to describe the same thing.
A Self Directed IRA LLC is made up of two parts:
- a Traditional or Roth Individual Retirement Account (IRA)
- a Limited Liability Company (LLC)
With this investment platform in place, an individual account holder can completely control investments with increased flexibility and reduced operational costs as opposed to attempting to operate straight out of a custodial account.
The LLC Formation
The LLC is formed by filing Articles of Organization with the state in which the LLC is to be operated and is governed by the laws of that state. It is considered to be a business entity structure and, in essence, is a hybrid combining aspects of both a partnership and a corporation.
When the IRA is moved inside the LLC, it is afforded limited liability protections and authorizes the Manager (generally the IRA account holder) to set up a checking account that will be utilized for making investments. With the checking account, the Manager of the LLC can enter into contracts and agreements on behalf of the LLC.
Steps In The Set Up Process
- Establishment of a new IRA Custodial account
- Set up of a special purpose LLC in the desired State
- Transfer of funds from existing to new Custodial account
- Set up of local bank account for the benefit of the LLC
- Transfer of funds from new Custodial account to local bank account
Once funds are transferred to the LLC bank account, the retirement investor has immediate access to the funds and can execute any allowable transaction.
An Example: Investing in Real Estate
In the case of real estate investments, the Manager can make an offer, negotiate the deal and handle the closing with the Title Company or with an Attorney, depending upon the state laws in force. Once the property is acquired, the Manager can handle administrative duties or may appoint a property manager.
We strongly believe in the asset protection afforded to the IRA account through the use of an IRA LLC. This is especially true when the structure has been designed by an attorney who specializes in ERISA law.
Should the LLC be sued, any liability is limited to the assets held within the company. The IRA account holder, and any other assets he/she may be holding outside the LLC, are completely protected.