A self-directed IRA with checkbook control can open a world of new investment options. Self-directed IRA investments put you in the driver’s seat and grant you control over your retirement plan. With the assistance of an IRA custodian, account holders can decide where to allocate their retirement funds and select the best assets for ultimate account growth.

While SDIRAs give investors plenty of freedom, there is a way to choose your own investments and control your funds without third-party fees.

“Checkbook” control can grant you immediate access to your funds for quick investments, repairs, and upkeep. If skipping out on fees and directly using your funds appeals to you, here’s how checkbook control can work for your SDIRA.

What is a Checkbook IRA?

A checkbook IRA enables account owners of a self-directed IRA to cut checks without prior approval from their custodian. To open up a checkbook IRA, a limited liability company has to be established under the IRA account to write checks.

What’s an LLC?

An LLC or Limited Liability Company functions as a legal entity that can purchase assets. An LLC gives you direct access to your funds, so you can invest where you see fit. All these funds are considered part of your IRA, meaning all funds for your investments must be filtered through your IRA.

While you can easily access cash, every cent must be used for IRA investments only. This is why it is imperative to keep track of all your purchases and to separate personal funds from your LLC. In addition, we recommend you read up on prohibited transactions, especially as they relate to SDIRA real estate.

In short, forming an LLC will allow you to invest while enjoying limited liability protections.


Consult with Horizon Trust

Opening a Limited Liability Company (LLC)

The process of opening an LLC with your self-directed IRA is simple. To open an LLC, follow the steps below:

Choose a Name.

The first step is to select a unique name for your checkbook IRA LLC that complies with your state’s naming requirements. Avoid terms like “insurance” or “bank” if they are subject to regulations. Also, consider purchasing the corresponding domain name for your business.

Appoint a Registered Agent.

Select a registered agent with a physical address in the state where your LLC is based. This agent will receive legal and official documents on behalf of your company.

Prepare and File Articles of Organization.

Create your LLC’s Articles of Organization, which establishes your LLC and includes essential details such as the company’s name, purpose, and member/manager contact information. File this document with your state’s designated agency. For example, Florida’s designated agency is the Florida Department of State, Division of Corporations.

Obtain an EIN.

After filing the Articles of Organization, apply for an Employer Identification Number (EIN) from the IRS. This number is necessary for reporting earnings and opening business bank accounts.

Seek Professional Assistance (Optional).

If any of this is too confusing, consider consulting with a qualified service or professional who can guide you through the process and ensure compliance with your state’s laws and regulations.

Completing these steps accurately and on time is crucial for a successful LLC formation. By following the correct procedures, you can establish your LLC and enjoy the benefits of limited liability protection.

Advantages of Checkbook Control

Establishing an SDIRA LLC allows you to invest your IRA/retirement funds and gives you “checkbook control” over your account while avoiding the waiting game.

Compared to traditional IRA accounts, a self-directed IRA with checkbook control offers several advantages:

  • Investment Flexibility. Self-directed IRAs with checkbook control allow you to expand your IRA investments beyond simple stocks and bonds. Alternative assets like real estate, precious metals, tax liens, private shares, rental property, and private lending opportunities are all fair game which may have the potential for higher returns.
  • Increased Speed and Efficiency. By eliminating the middleman (custodial approval for every investment), you can expect a more streamlined investment process with easier access to your IRA. Every minute matters if you’re looking to make time-sensitive investments that can rise 10% at the flip of a hat.
  • Reduces Transaction Fees. Under traditional IRA structures, all transactions must be handled by your IRA custodian, which can rack up all types of fees, including transaction, custodial asset valuation, and account establishment fees. Although you still need to report your IRA transactions to your custodian, you will only be responsible for one interaction, not multiple interactions. If you are looking to invest in any alternative asset requiring many withdrawals, consider an LLC.
  • Estate Planning and Asset Protection. Depending on the state where your LLC is based, assets held within it may receive enhanced estate planning and asset protection benefits by avoiding the costly probate process altogether. As you know, probate processes can involve delays and legal complications that can only aggravate those specific individuals or organizations you want your retirement savings to go to.

Disadvantages of an LLC

As the sole manager of an LLC, there is a lot of room for error if you aren’t diligent. You are responsible for your investments, which can be a drawback if you aren’t careful. It is possible to make an error with tax requirements, fees, limitations, and following IRS regulations. These issues can be avoided if you stay on top of your purchases. Keep an eye on where your money goes and follow the rules.

All contributions and purchases are for your IRA only, meaning all investments should be funded through your IRA. Account managers cannot receive compensation for handling their LLC fund, and all annual contributions should be placed in the IRA account.

Due Diligence

Opening an LLC using your IRA account can be an excellent investment if you want more control over your retirement fund, allowing you to invest in many alternative assets beyond stocks and bonds. You can also eliminate custodial service-related transaction fees, write checks directly from the LLC’s bank account, and shield your retirement funds from creditors with proper research, financial know-how, and accurate recording.

Before taking part in any investment opportunity, be sure you’ve performed your due diligence and selected the best path as the account owner. Take charge of your retirement by contacting our trusted SDIRA Custodians today.

Quick Q&A Recap

What is a self-directed IRA with checkbook control?

A self-directed IRA with checkbook control is an individual retirement account (IRA) that allows direct access to retirement funds through a special-purpose LLC owned by the IRA. This offers several benefits, including the ability to write checks using LLC funds and greater flexibility in making individual investments beyond stocks and bonds.

What are the benefits of a self-directed IRA with checkbook control?

Benefits of a self-directed IRA with checkbook control include but are not limited to, greater investment options, the ability to make investment decisions without needing custodial approval, and minimizing custodial-related fees.

What recommendations can you make for people interested in starting a self-directed IRA with checkbook control?

One of our best pieces of advice is to ensure you are well aware of IRS reporting requirements and proper structuring processes. To set it up correctly, you may need to consult with a licensed professional, such as a tax advisor specializing in self-directed IRAs, to ensure that you adhere to all IRS regulations and avoid potential pitfalls/prohibited transactions in the future.