Can an LLC Own Precious Metals?
There is a common misperception that physical gold investments held within an LLC provide complete asset protection. Unfortunately, this is incorrect.
Recent US Tax Court ruling on a self-directed IRA/LLC structure that held precious metals at home illustrates this point. A judgment creditor of an LLC could only seek reimbursement through distributions by it.
Limited Liability
Investment of precious metals through an LLC provides limited liability protection, providing protection from lawsuits or creditor claims arising from its purchase. Please be aware, however, that not all states offer this privilege.
Before making any purchases of metals from an LLC, its title must first be transferred over. A good approach would be forming the LLC first and purchasing metals under that name – then transfer the chains of title using written documents signed before a notary.
Keep in mind that while an LLC may provide some asset protection for your retirement investments, it doesn’t offer as much as an Individual Retirement Account or other types of self-directed accounts do. Therefore, it’s wise to consult a licensed tax professional prior to investing precious metals through any type of self-directed account – particularly if your precious metals originate from foreign countries.
Asset Protection
An LLC provides better asset protection than individual investments when it comes to precious metals. When owned by an LLC, precious metals become company assets rather than personal belongings of its members – protecting your personal assets from debts or liabilities related to the LLC.
Conversely, gold held under an individual name can be taken by creditors during a lawsuit, however judgment creditors have many ways of circumventing this. If personal funds mix with business accounts or you use company bank accounts for personal expenses then judgment creditors can easily prove that there is no clear separation between your personal and business assets.
Storage and insurance costs are another concern with physical precious metals, and can make selling at market prices difficult and non-passive income nonexistent compared to stocks and bonds. Due to these issues, it’s essential that experienced legal and tax advisors be available.
Taxes
Gold and silver have long been recognized as tangible stores of wealth. When investing, these precious metals provide diversification against inflation, currency fluctuations, market risk, as well as appreciating in value over time – qualities which make them appealing options in times of geopolitical or economic instability.
Physical precious metals are considered collectibles by the IRS and therefore subject to higher capital gains tax rates than other investments. Storage and insurance costs as well as liquidity concerns must also be taken into account when making such an investment decision.
Utilizing an LLC to invest in precious metals may present unique legal and tax implications. Before making your investment decision, consult with legal or tax professionals about their operating agreement for your LLC. When the entity is disregarded or treated as a partnership, profits, deductions and credits flow directly through to members who report them on their personal income tax returns; pass-through taxation helps avoid double taxation often seen with corporations; proper record keeping can further minimize taxes by keeping track of purchase prices, sale prices and dates as well as storage and insurance costs that can be deducted from cost basis calculations.
Title
Gold is an asset with diverse characteristics that can bring diversification to any portfolio. It serves as a hedge against inflation and market fluctuations, and historically held high value due to its rarity, demand, and previous use as currency. Unfortunately, precious metals don’t produce income like stocks or bonds do and their liquidity poses challenges that other assets don’t present.
When purchasing gold through an LLC, it must be stored with an approved custodian to comply with IRS self-directed IRA guidelines and local state laws regarding commodity investments.
An LLC is a hybrid business structure that combines partnership taxes with limited liability corporation privileges, enabling it to purchase and sell property, including gold, as well as invest across asset classes. An IRA-owned LLC must use an approved precious metals dealer, store its gold at registered location, and net long-term capital gains tax rate of 28% applies when selling them.
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