Professional Services

Establishing the LLC

There are two options for holding the investments made. The client may have his or her self-directed retirement plan (generally the self-directed IRA) purchase and hold the investments or may establish a LLC (or other entity) to purchase and hold the investments. If a LLC is used, the self-directed IRA invests in a newly formed LLC. The IRA owner is generally the manager of the LLC.

There are many benefits to using a LLC for a client's self-directed investments: These benefits include:

  • Gives you control and flexibility on the purchase of investments. Without the LLC, all investment purchases have to go through the custodian. With a LLC you make the purchase when and as quickly as you want using the funds of the LLC.
  • Limited Custodial Fees. There is generally a transaction fee each time you invest in an asset if the transaction goes through the custodian. You generally avoid those fees if the investments are made through the LLC.
  • Multiple Investors. When structured properly, you can bring in other investors in the LLC thereby bringing additional investment capital beyond the funds in your self-directed IRA.

The use of LLC also has certain disadvantages:

  • The formation of the LLC and the investment by the IRA should be completed in a particular process. If the IRA LLC is created in the wrong order, or if the LLC documents are not executed correctly, or if the LLC is not funded properly, you can create a prohibited transaction or lead to an IRA audit.
  • The proper documents must be created ( create and file Articles of Organization, Obtain a tax identification, create an Operating Agreement, prepare any necessary Notice of Publication).
  • With the greater control comes increased responsibility and potential liability. The IRA owner takes sole responsibility for ensuring that the ongoing investments and operation of the LLC does not violate tax law and applicable regulations.

LLC Services We Offer

  • We can help you choose whether an entity best serves your purpose and if so, which entity.
  • We can register the LLC with the appropriate state agency and draft all the appropriate documents to establish and operate the LLC.
  • We can guide your investment decisions so you do not run afoul of the prohibited transactions rules.
  • We can prepare and file any required year-end tax documents.
  • We can serve on an ongoing basis as your legal and tax advisor You will have no need to search for or be assigned an outside attorney by another company (many companies offering self-directed LLC preparation services have to refer their customers to an outside attorney).
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