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The IRA LLC: An Easy Way to Invest With Your Self-Directed IRA

Written by Daniel Ortega, Head of Retails Sales

a man signing paperwork. Creating an IRA LLC is a strong investment choice

 

An IRA LLC may be the diversification your portfolio needs.

By now, hopefully, you know you should diversify your investment portfolio. And suppose you’ve been reading the work put out by Vantage and other advocates of alternative investing. In that case, you know that a Self-Directed IRA is the best way to diversify beyond the stock market. You can fund Real estate, cryptocurrency, and even investment in private companies with your IRA dollars.

What is the easiest and safest way to make these purchases?

That’s where the IRA LLC comes into play. An IRA LLC is the ultimate diversification strategy. With this structure, you can hold real estate, private placements into private companies, private lending deals, foreign and cryptocurrency simultaneously.

 Do you want to buy a property in Mexico? Great! Do you want to invest in cryptocurrency? Great! Perhaps, you don’t have any idea what you want to invest in? With this structure, you can place your funds directly in the traditional stock market and liquidate required capital as you need it without any custodian-to-custodian interaction.

 

Benefits: 

With an IRA LLC, several benefits make this an easy way to invest your IRA dollars. For starters, you can set up a business banking account with your LLC as the business, with the funds coming directly from your Self-Directed IRA. Then, when you’re ready to spend (maybe that property in Mexico has become available), you can transact directly from your business banking account. 

 This can also come in handy when avoiding transaction costs from your Self-Directed IRA. In many cases, the cost of transacting with a business banking account is cheaper than the cost of conducting similar transactions directly through your Self-Directed IRA. You also benefit from some additional legal protection of your assets as long as you maintain independent accounts.

Challenges:

 With this freedom comes responsibility. Not having to facilitate every transaction through a custodian is great, but that can make it difficult to avoid the pitfalls often overlooked when managing the IRA LLC by yourself. 

Also, not having a clear understanding of the rules and regulations of a Self-Directed IRA can put you, your IRA, and your IRA LLC at risk. An IRA-owned LLC is also very different than the traditional LLC that you are likely familiar with. It is not recommended that you try to create this LLC independently, as there is specific language to meet all IRS rules and regulations. 

This is not to scare you but rather to educate you that this is an excellent tool if used appropriately.

Here at Vantage, we specialize in Self-Directed IRAs and are familiar with the mechanics of an IRA LLC. In addition, we have resources available to you that can assist with establishing an LLC and answer any questions you might have about the structure. If you’re interested in learning how an IRA LLC can help take your IRA to the next level, contact us! One of our knowledgeable teammates will be happy to assist you. 

If you are new to Self-Directed IRAs, learn more about your investment options by checking our Knowledge Center