Can an IRA Go Into an LLC?

An LLC allows for more diversification when investing your Self-Directed IRA into nontraditional assets like real estate, private businesses, life insurance policies and precious metal coins or bullion. But to do this properly it must be established with manager management and include an operating agreement that restricts prohibited transactions.

Limited Liability

An LLC is an excellent alternative investment vehicle for Self Directed IRA owners seeking to diversify their asset options into private equity, real estate and precious metals. Owning one allows IRA owners to exercise checkbook control of investments within their IRA without incurring custodian costs and time delays for each transaction.

However, LLCs owned by an IRA must be carefully established so as to comply with state law and avoid prohibited transactions. If funds from your IRA and the LLC commingle, this could create an arms-length transaction which disqualifies its tax-advantaged status and compromise its tax advantages.

Establishing an LLC requires taking into account each state’s requirements and fees; some charge one-time registration fees while others impose annual franchise taxes such as California’s $800 LLC Franchise Tax. Furthermore, registered agents are necessary for representing an LLC’s interests on its behalf and therefore charge fees accordingly.

Pass-Through Income

Your IRA gains pass-through income when investing in an LLC, meaning profits are taxed at an individual rather than corporate level and that diversifying your portfolio makes your yearly returns more stable and predictable.

However, it’s essential that both your IRA and LLC are structured correctly; any time funds from one source enter both entities it could disqualify your IRA from being tax-advantaged. Furthermore, it’s also crucial that you consider your state’s specific requirements for LLCs such as one-time establishment fees or annual franchise taxes; California charges an $800 franchise tax fee on this type of entity.

Your IRA must also comply with IRS rules regarding prohibited transactions, so it is advisable to work with legal counsel who understands them to help ensure your LLC’s operating agreement includes parameters to prevent your IRA from engaging in any prohibited transactions – these could include investments such as real estate, tax liens, private company stock or precious metals among others.


Due to being tax-passthrough entities, LLC investments offer IRA investors an unique way of diversifying their portfolios. An LLC can be used to invest in various alternative assets including real estate, tax liens, private businesses and precious metals – thereby giving IRA investors access to investment options otherwise unavailable to them.

IRA owners opting to make real estate investments that require hands-on management often use LLCs instead of custodians in order to save time. By doing this, their instructions and authorizations for expenses and contracts can be sent directly through.

However, IRAs cannot invest in LLCs owned by people or entities (known as disqualified persons ) who hold 50% or more ownership, due to prohibited transaction rules which prohibit investing in assets directly related to disqualified persons. It is therefore best to use a checkbook control IRA when investing in real estate LLCs as this will save on costs related to paying property management companies as well as speed up the closing process.

Tax Benefits

Many self-directed IRA owners opt for an LLC as a tax strategy due to its pass-through income structure, meaning profits flow directly back into their IRA without double taxation.

This arrangement is well suited to investments that require active involvement, such as real estate, private loans and private business equity investments. Furthermore, this structure can accommodate alternative assets like tax liens and precious metals.

An IRA LLC can save money on recordkeeping fees by forgoing custodial services for every transaction, while checkbook control provides not only cost savings but time savings as it allows the IRA owner to make decisions and complete transactions more quickly.

Notably, IRA investments in an LLC must comply with IRS rules regarding prohibited transactions2, so it’s highly advised to seek advice from an experienced legal counsel. Furthermore, consult your tax professional prior to investing.

Raymond Banks Administrator
Raymond Banks is a published author in the commodity world. He has written extensively about gold and silver investments, and his work has been featured in some of the most respected financial journals in the industry. Raymond\\\'s expertise in the commodities market is highly sought-after, and he regularly delivers presentations on behalf of various investment firms. He is also a regular guest on financial news programmes, where he offers his expert insights into the latest commodity trends.

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