Having complete control of the funds in your retirement account not only allows for more diversification in your portfolio but also ensures that you’re the one pulling the strings. While many IRA options are very “hands-off” in nature, an IRA checkbook or SDIRA LLC account puts you in complete control of how your money works for you.

What is the Common Ground Between an IRA and Checkbook?

A self-directed IRA is a variation of an IRA explicitly designed to offer a vast choice of investment options than a standard IRA. 

Most traditional IRA accounts are regulated by custodians, such as banks, and feature a limited spectrum of investment instruments. Account-holders can only purchase stocks, bonds, and mutual funds with regular tax-advantaged IRAs. 

Contrary to this type of account, an SDIRA enables an IRA holder to diversify their investment portfolio with broader options authorized under the IRS code to generate income in the long run.

A checkbook for a self-directed IRA, in turn, is a tool that grants IRA owners flexibility to manage their finances and earn passive income from their retirement savings. This mechanism empowers the IRA holder to establish a limited liability company (LLC) as the basis for the subsequent efficient management of their resources. 

This way, the account owner can make business decisions, invest the funds independently with no IRA custodian involvement, and write checks directly out of their SDIRA LLC.

SDIRA LLC Commonalities:

  • Investors can invest in several different asset classes.
  • Both account types require the investor to work with a custodian.
  • The investor can add funds to either type of account.


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Who Should Open a Checkbook IRA LLC?

Generally, anyone who wants greater control over their retirement funds should consider an SDIRA LLC. 

Since checkbook IRAs allow the investor to take a hands-on approach to their retirement funds, these accounts are best suited for people who are savvy investors. To maximize success, the investor should have at least a working knowledge of multiple types of assets and how they increase and decrease in value over time. 

What Are the Pros and Cons of a Checkbook LLC?

As is the case with any investment opportunity, there are some pros and cons to consider.

Pros of Checkbook LLC

IRA checkbooks represent a robust platform that permits account holders to easily invest in alternative assets and offer a spectrum of the following benefits.

  • Decision-Making Independence: The checkbook enables you to monitor the process and execution of all financial transactions. Moreover, as an account manager, this scheme allows you to approve investment decisions while assuming full responsibility for asset accounting, the legitimacy of actions, and compliance with IRS rules.
  • Solid Investment Prospects: With this alternative investment tool and certain investment literacy, you can enjoy various investment options. Investing is a complicated process, but you can affect your investment returns by selecting only the options you want with checkbooks. In addition to stocks and bonds, you can invest in self-directed IRA real estate, tax certificates and deeds, tax liens, multifamily houses, hedge funds, and any other IRA-eligible asset.
  • Fast Operations and Less Custodial Involvement:  IRA LLC  holders have signing authority to make and complete purchases without custodial interference. Such Instant access comes in handy when multiple investors compete for a specific investment, and a solution should be made immediately. The checkbook provides real-time management of funds without recourse to a custodian’s approval, greatly simplifying the transaction process and allowing account holders to complete a transaction in the shortest possible time. Therefore, retirement investors have immediate access to the money and can write checks to settle their assets when needed.
  • Tax-Free Transactions: Since a checkbook IRA LLC is opened based on a self-directed IRA, any investment operations are not tax-deductible. Still, the income earned on the investment must be deposited back directly into the LLC account.  

Cons of Checkbook LLC

Despite the number of benefits a checkbook provides, there are also certain risks. The most common issues to consider are the following. 

  • Higher Level of Responsibility: IRA LLC owners should understand that managing the assets entails certain risks when opening a checkbook. Therefore, it is essential to be legally savvy or consult with experts to create investment channels compliant with IRS rules and policies.
  • Independent Maintenance of Accounting Records: As the manager of an LLC, you must keep track of all the accounting data. Namely, you are obliged to file tax returns and annual reports to maintain a constant, correct accounting of funds in your account. Failure to comply with this requirement may result in administrative fees and can lead to serious consequences.  Accounting can be a daunting task for the IRA owner and represents another potential disadvantage. Before opening a checkbook, consider whether you need an independent financial advisor to manage your account.
  • Strict IRS Rules and Restrictions: The IRS imposes certain restrictions and rules on IRA checkbooks. To properly structure an account, conduct legitimate transactions, and avoid the pitfalls, you should have a clear picture of all the legal aspects while managing your checkbook.

It’s essential to choose your potential investments with due diligence and invest in assets not prohibited by the IRS because violating the rules can lead to penalties and the liquidation of your account. 

The list of prohibited transactions includes conducting financial transactions with disqualified persons, i.e., your immediate family members, or investing in specific tools, namely life insurance, jewelry, or artwork. 

In addition, you can’t use retirement funds to cover personal expenses related to losses incurred after unprofitable investments or use them for any other personal purposes since it is against the law to withdraw funds before retirement.

Popular Checkbook IRA LLC Investments

While traditional IRAs only allow people to invest in stocks, bonds, mutual funds, and similar options, checkbook IRA LLC investments are more varied. Some of the most popular investments include: 

  • Real estate
  • Startups
  • Small businesses
  • Land trusts
  • Convertible notes
  • Precious metals

How Do You Set Up a Checkbook IRA?

The IRS requires that all IRAs involve a licensed custodian. Once you have chosen the custodian who you want to work with on your checkbook IRA, the process is simple. 

  1. File the proper paperwork
  2. Fund your IRA
  3. Set up your checkbook LLC for the IRA
  4. Appoint yourself as the account manager 
  5. Open a bank account as the LLC
  6. Begin investing

Single-Member LLC Rules for IRAs

The IRS strictly regulates checkbook IRA LLCs. With that in mind, there are certain rules you must be sure to follow.

For example, single-member LLCs must work with a custodian and be licensed within their particular state. They can also only invest in assets allowed by federal state law and fund them with a separate bank account–specifically for the LLC. 

Find the Best Investment Prospect

While checkbook LLCs have pros and cons, they continue to be a popular choice due to the amount of control they give investors. They are complex options, but when you approach them with the right strategy, they can prove very lucrative. The team at Horizon Trust can help you create your strategy while providing you with the resources you need to achieve your goals.


What is a checkbook IRA?

A checkbook IRA is an investment tool that gives the account owner complete control over the way money in the account gets spent.

What is the difference between an IRA trust and an LLC?

An LLC allows you to partake in multi-member investing, unlike a trust. However, an IRA trust does not incur state fees like an LLC.

What can I do with a checkbook IRA?

With checkbook control, you can invest in virtually any legal asset on the market. This includes real estate, precious metals, tax liens, and much more.