Limited Liability Company

One of the most effective ways to invest with your self-directed IRA (SDIRA) is to set up a limited liability corporation (LLC).

An SDIRA LLC allows an investor to have full control over their portfolio so they can further diversify their investments. Find out more about why SDIRA LLCs are so popular and how they can benefit you for the future.

What is a Limited Liability Company?

A limited liability company, also referred to as an LLC, is a business structure that protects owners from financial loss associated with debts or liabilities. Each state has different LLC requirements.

An LLC blends elements of partnership and corporate structures to limit the liability of its owners in its business dealings.

Note: LLCs do not need to be organized for profit.

How Does a Self-Directed IRA LLC Work?

In an effort to reduce fees, paperwork, and processing delays, some self-directed IRA investors choose to employ a Limited Liability Company (LLC) IRA structure.

Under an SDIRA LLC, the LLC works as the asset-holding company for the IRA. This allows the owner of the LLC (the investor) to not only invest in asset classes not allowed by traditional IRAs but also acquire full checkbook control, meaning they can write a check whenever they want to purchase an asset.

Benefits of an SDIRA LLC

In addition to granting the investor access to multiple investment classes, there are several other benefits associated with using an LLC to manage your retirement portfolio.

Investors who choose an SDIRA LLC often get access to reduced fees if the SDIRA provider charges on a per-asset basis. Since multiple assets are all owned by the same LLC, many SDIRA providers view them as a single asset.

This structure also provides quick access to the funds in your account. Since the investor is the owner of the LLC, they have “checkbook control,” meaning that the funds can be easily accessed in order to make new investments without having to go through an intermediary.

Finally, thanks to the structure of an LLC, the investor is protected against any financial liabilities brought about by failed investments. While the money used for a failed investment is lost, the owner of the LLC cannot be held personally responsible for any additional losses.

SDIRA LLC Benefits Summarized

  • Invest in alternative assets
  • Checkbook control
  • Personal liability protection
  • Reduced fees (in some cases)

SDIRA LLC Tax Requirements

Since LLCs are not considered taxable entities by the IRS, the owner of the LLC must make an election regarding how they want to be taxed. When dealing with single-member LLCs, which is what most SDIRAs are, the income generated by the LLC must be reported on the owner’s tax return.

How to Open a Self-Directed IRA LLC

Setting up a self-directed IRA LLC begins by funding the account.

You can place the funds in the account with a rollover or transfer of an existing IRA, making new contributions, or a combination of the two. Once the money is in the account, you can fill out the paperwork required by your state to set up an LLC.

You should work with a trusted fiduciary during this step, as the paperwork must be filled out correctly in order for the LLC to launch.

You will also need to set up a bank account specifically for the LLC. You cannot use your existing personal bank account for the LLC. At that point, you will be ready to begin investing, as the process is incredibly simple.

If you’re interested in opening an LLC using an SDIRA, turn to the experts at Horizon Trust. We offer low fees and a streamlined process to help you set up and fund your account quickly, whether you are rolling over funds or adding new ones.


How much does it cost to open an IRA LLC?

The company that you choose to set up your SDIRA LLC with will have its own pricing set up. Based on national averages, the cost of establishing an SDIRA LLC is anywhere between $50 and $300.

Does an IRA LLC file a tax return?

No. Since LLCs are not considered taxable by the IRS, the only tax return that must be filed is by the owner of the LLC.

Is a self-directed IRA LLC a disregarded entity?

Yes, it is.

How much money can I put in an SDIRA LLC?

The maximum allowable contribution for 2023 is $6,500 if you are under 50 years of age. Investors who are older than 50 can contribute an additional $1,000 in catch-up contributions, resulting in a maximum allowable contribution of $7,500.

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