Shutting Down an IRA LLC
Shutting down an IRA-owned LLC involves liquidation of the IRA’s interest in the LLC as well as filing with the state to have the LLC dissolved.
Liquidating the IRA’s interest in the LLC is a three-step process:
- Selling membership interest in the LLC back to the self-directed IRA account
- Dissolution of the LLC and release of asset from the IRA account
- Having the IRA custodian issue an IRA distribution to you or transfer to another IRA custodian.
Before you Begin
These instructions apply when the LLC is strictly holding cash. If your IRA LLC holds non-traditional assets such as real estate, those assets either must be liquidated to cash or transferred in-kind to another IRA that will accept such assets. Please contact your Safeguard consultant if you wish to transfer or distribute assets in-kind.
Funds must be properly routed and reported through the IRA account. Under no circumstances should you take funds for personal use directly from your LLC bank account.
If your LLC is a partnership between more than one IRA account, funds must be reduced by all partner accounts in proportion to the original equity balance of the partnership. Contact your Safeguard consultant for assistance.
If You Need Help
If you need assistance with this process, please contact your Safeguard consultant. While these transactions can all be executed directly between you and your self-directed IRA Custodian we are happy to help.
You may want to fax or e-mail copies of forms you plan to submit to IRA Services Trust Company. We can quickly confirm whether they are properly completed, and potentially avoid delays in processing.
IRA Services Trust Co. Contact Information
8:00am – 5:00pm, Monday – Friday, Pacific time
Step 1: Dissolve the State LLC Entity
The process of dissolving an LLC entity is generally a simple filing. There may be no cost, or there could be a small filing fee.
Contact the Secretary of State Corporation Division for the state where your LLC is filed for more details. There is generally a form available on the state’s web site for this purpose.
In some states with separate franchise or business taxes, you must file a final return and/or obtain a letter of clearance from the state tax authority in order to terminate the LLC entity with the Secretary of State/Corporation Division.
If you need assistance with the termination process, please contact your local counsel.
An expense associated with the dissolution, including legal counsel, should be paid with LLC funds.
Step 2: Update the Recorded Valuation for the LLC
The end result of the LLC dissolution is that the value of the LLC as recorded by IRA Services Trust Co. needs to go to $0. Prior to liquidating cash/value from the LLC to the IRA, the value of the LLC needs to be updated to reflect the current value that will be liquidated.
For most investors, this can be done online using the following link:
If the LLC dissolution is accompanying a distribution in-kind to yourself or a Roth IRA conversion, then a formal valuation signed by a licensed professional will be required. Such certification is required since the event will create a tax liability. This valuation must be submitted using the IRA LLC Valuation Form
Step 3: Liquidating the IRA’s Interest in the LLC
This is a liquidation of ownership interest in the LLC (similar to selling shares of a stock, for example).
You can send a check or wire funds. The IRA Services Delivery Instructions form provides the details.
The transaction needs to be documented with a Deposit Information form. This can be completed online if you have wired funds (preferably on the same day as the wire) or printed and mailed with a check.
- Complete section 1 with your personal information
- Complete section 2, 7 for the amount of the distribution from your LLC. This will be a full liquidation of the LLC.
- Sign in section 4
- Include a copy of the State Dissolution Certificate. The LLC asset cannot be fully liquidated from the account without this.
Step 3: Distribute IRA funds and Close IRA Account
You may choose to have the IRA cash sent to you as a distribution (potentially taxable) or transferred to another IRA account.
Transfer to another IRA
For a transfer to another IRA, simply leave the funds in the IRA Services IRA account and initiate the request for transfer through your new IRA custodian. They will communicate with IRA Services to have the transfer executed.
IRA Distribution to you
To have IRA Services Trust Company issue a taxable distribution from your IRA to you, include a
Distribution Request form with the above documents
At the end of the year IRA Services Trust Company will issue a 1099-R to report the distribution from your IRA to the IRS. You will receive a copy, and need to include this distribution amount on your personal tax return.
While you can send the cash from the LLC to the IRA at any time, you must provide IRA Services Trust Co. with a dissolution certificate for the LLC in order for them to release the LLC asset from the account. If you request a distribution/transfer from the IRA prior to submitting the LLC Dissolution certificate, IRA Services will retain the minimum cash balance amount ($300 or $500 depending on IRA start date) and continue to assess quarterly charges on the account. You would then need to submit a 2nd transfer/distribution request to fully close the account once the LLC Dissolution certificate has been provided.
Once funds have been added to your IRA account, the processing of the Distribution Request can take between 3-5 business days, at which point a check will be mailed to you.
Trustee-to-trustee transfers commonly take from 5-15 business days depending on the institution.
The following fees may apply. Check the IRA Services Fee Schedule for current charges
The cost to sell LLC membership interest is $40.00. (Sale of a Tier 4 asset per their fee schedule).
A check issuance to you costs $10.00
A wire transfer to another institution costs $25.00
Closing your IRA account costs $150.00