Can an LLC Hold Precious Metals?
Many have been sold the idea that setting up an LLC and purchasing precious metals to store at home would be an excellent investment strategy. Unfortunately, this is a dangerous misconception.
Recent Tax Court proceedings against a couple who used an LLC owned by their IRA to store American Eagle coins demonstrate why.
1. Asset Protection
Many individuals take proactive steps to safeguard their assets against lawsuits or legal liability, such as creating LLCs and other business entities; setting up offshore trusts; using DAPTs (depending on state law); or transferring assets into exempt investments such as annuities. An experienced attorney can advise clients about the most suitable methods to safeguard personal and business assets depending on individual circumstances.
As a starting point, it’s wise to establish clear distinctions between personal and business finances. To do this, obtain an EIN and open a business bank account; label withdrawals from an LLC as owner’s draws rather than employee draws when possible – this will avoid confusion while potentially decreasing the chances of courts holding you personally liable for business debt or liability, deterring frivolous lawsuits as well. These precautions may prove especially valuable to entrepreneurs taking calculated risks to build their companies.
2. Asset Management
Asset management is the systematic practice of overseeing, realizing, and protecting all the value responsible groups or entities are accountable for. This includes tangible and intangible assets. Businesses using asset protection strategies usually utilize legal structures that restrict creditors to only pursue claims against specific assets within their business versus all of them at once.
Asset management involves many essential functions, including evaluating risks associated with individual assets, tracking the locations of those assets and communicating regularly on their performance. Asset management also encompasses eliminating exhausted or dead assets that only exist on accounting books without offering any real benefit to their respective businesses.
Asset management companies that specialize exclusively in this field and banks with asset management divisions (such as Goldman Sachs or JP Morgan) typically provide internship programs for students or young professionals interested in finance or investment roles. Furthermore, many people work as asset management consultants or brokers for private or institutional clients.
Precious metals provide excellent asset protection; however, as with any financial investment it is crucial that investors understand their tax implications when holding precious metals.
Any profit earned through the sale of precious metal assets is typically subject to capital gains taxation. Depending on your tax bracket and whether or not your sale was long or short-term, your applicable tax rate may differ accordingly.
To avoid taxation when purchasing precious metals from dealers, All States 1031 Exchange Facilitator is an effective solution that uses qualified 1031 exchange companies that comply with Section 1031 requirements and avoid having to issue Form 1099-B forms directly to the IRS.
Individuals looking to invest in precious metals through their retirement accounts should opt for an LLC as it ensures title to assets is held in the name of the entity instead of themselves, providing greater privacy.
Precious metals are an attractive investment option for many reasons. They serve as an insurance policy against inflation and hold their value during times of economic instability, in addition to being tangible assets that many prefer having in their portfolio.
Distributions from an LLC to its members can include payments of cash, stock or physical products at regular intervals or whenever needed to keep business running smoothly.
The Operating Agreement should typically specify that all Members or Managers who need to make a Distribution must vote to do so – either through a group phone call, text message, meeting or poll. It may even stipulate that a minimum percentage must vote in favor of making such Distribution.
Precious metal IRAs may be common and popular, but be wary. The US Tax Court recently issued an adverse ruling to a couple who used an IRA-owned LLC to purchase and store American Eagle coins at home using funds held within that IRA/LLC; according to that court decision, any distribution from that IRA/LLC constitutes a taxable distribution requiring them to pay taxes on all value of coins in their possession, regardless of when or if they physically possessed them.
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