IRA-Owned LLC

The IRA-Owned LLC (sometimes called a Checkbook IRA) essentially goes hand in hand with the Self-Directed IRA account as one vehicle. If a self-directed IRA acquires this special-purpose LLC (which then opens a commercial bank account) the owner then effectively has checkbook access to IRA funds. Checks can be written for various purposes, including making investments directly from the IRA LLC’s checking account. This can streamline and speed up the process, while giving IRA owners more confidence, and reducing their time demands and IRA related expenses. As an LLC is a pass-through entity when it comes to federal income taxes, any gains or losses are usually passed through to the IRA. Check with your tax advisor to make sure this is the case for your LLC. This LLC vehicle can be a hyper-convenient way to leverage a self-directed IRA. It may appear to be a necessity for those bidding on real estate at auctions and will be a huge convenience to those investing in tax liens. However, it also certainly increases the risk of individual investors making mistakes and engaging in prohibited transactions which can trigger tax penalties.

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