John Worley Blog

The Ultimate Guide On Self Directed Checkbook Control IRA LLC

John Worley - Monday, December 19, 2016

Self-directed checkbook control IRA LLC
is a term used to define when an individual has signed authority over their retirement funds. This gives them more freedom at their disposal and can manage their assets with ease. Although self-directed checkbook control IRA LLC is not a requirement in order to invest with the IRA, it poses many different benefits that help people reach their saving plans.

Checkbook control IRA LLC has many different names including Checkbook control IRA, Checkbook LLC and single member LLC. In essence, a checkbook control IRA LLC gives an individual direct access to the IRA assets that have been afforded to them by the IRA provider. The account holder will be given the freedom to utilize the IRA funds which means the check book IRA requires a high degree of responsibility from the IRA holder. Due to the many different benefits of self-directed checkbook control there has been a rapid increase of the people setting up these flexible accounts.

How to set up a checkbook control IRA LLC?

Setting up a checkbook control IRA LLC is not a difficult process but it does require a few prerequisites that have to be met in order set this account up. First, an LLC must be established, that is owned by the relevant IRA. After an LLC has been established, a business checking account will be created that will directly be linked to the self directed IRA funds. This checking account requires a tax ID (EIN) and a copy of the articles of incorporation. Once this account has been created you will elect yourself as a managing member, which will put you in control of that checkbook and the self-directed IRA funds in that account. 

Different categories of checkbook control

Generally, there are three categories of checkbook control;

1) Self directed financial institution IRA: This category of checkbook control will allow you to direct your IRA funds towards different investments. Although, this is limited to a certain extent, as the account holder can only direct his or her IRA funds to the products offered by the relevant financial institution. This kind of checkbook control will not allow you to direct your funds to different lucrative investments such as foreign currency or real estate.

2) Self directed custodian control IRA: Self directed IRA without checkbook control allows the account holder to make nontraditional investments that pose a lucrative option, but can only be done with the consent of the custodian. This means that before an investment is made the custodian will have to be informed and without their consent the funds will not be directed. This will increase the time span that it will take you to make an investment and will also have to pay high annual fees along with the additional transaction fees. Not only that, proper documentation will have to be provided to the account holder who will determine whether investing the funds in the project in question is a viable option or not. 

3) Self directed checkbook control IRA LLC: This category of checkbook control offers the account holder immense freedom. These account holders are not limited to investments within any financial institution and neither do they have to get any investment approved by a custodian. This is the most popular category of checkbook control IRA as it eliminates all the barriers of the other categories. This gives the account holder the opportunity to pounce on any opportunity that presents itself without any unnecessary delays or costs. This category or structure has been used for the past 30 years and has become the leading category when it comes to checkbook control.

Benefits of self directed checkbook control IRA LLC

Given below are the most prominent benefits of self directed checkbook control
There is no time delay when you decide how to distribute funds.
There is a chance of a low IRA provider fees when the structure is self directed.
No restriction on investments which provides versatile options to the account holder.
There is no time delay when transferring assets to the IRA for distribution.

Drawbacks of self directed checkbook control IRA LLC

Even though this kind of checkbook control has outstanding benefits there are a few drawbacks that should keep into perspective
The LLC associated to the account is a running entity, in order to establish this you will have to be familiar with IRS rules and the running entities rules and regulations. These rules are often difficult and are versatile in nature.
Grasping these rules may take some time.
Investments will be limited to IRA approved projects.
Infringement of the IRS rules can lead to significant penalties and taxes.

Responsibilities of the account holder

In order to better understand the account holder’s responsibilities, it is vital that you check your local states rules and regulations, as each state has their own responsibilities that have to be followed. Given below are the general responsibilities of the account holder.

Create a corporate bank account
Authorize officers to sign checks
Design a trade name
Understand tax implication of the entity
Fill all the state, federal and local tax forms
Determine the zone for you entity
Obtain a license for the relevant entity
Filling IRS reports

This list is just a concise over view of the responsibilities that an account holder must to adhere to in order to successfully set up a self-directed checkbook control IRA LLC. Although there is no doubt that this process involves a lot of paperwork and documentation it poses many different benefits, as self-directed checkbook control gives an individual investment powers like never before. 

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