What is a Checkbook IRA?
In the world of self-directed investing, the subject of checkbook IRA is one which causes some confusion among investors. What is it? How does it work? And is it right for you? Keep reading to find out.
What is a Checkbook IRA?
A Checkbook IRA is a self-directed IRA account that is invested in a Limited Liability Company, or LLC, in which the IRA owner is a manager or owner. This ownership situation gives the owner an opportunity to have “checkbook control,” which can be the optimal choice for a future business owner who wants to earn tax benefits and run a business.
How Does a Checkbook IRA Work?
To have full checkbook control, you’ll need to use a self-directed IRA to fund, establish, and invest in a new LLC. Basically, the IRA account will be a legal investor in your new business venture.
After the business is established and is a legal LLC, you as the “managing member” or general manager of the business will set up a new business checking account. As the IRA holder, you’ll be able to control all of the funds in the LLC account, giving you “checkbook control.”
Advantages of an IRA LLC with Checkbook Control
While many investment opportunities are full of risk, using a self-directed IRA to create an LLC and gain checkbook control offers you a unique amount of control over your financial future. Here are two benefits of this investment option:
- Administrative Costs are Covered
One of the biggest benefits of using a self-directed IRA to establish and fund an LLC is that you can avoid many of the administrative and transaction fees associated with self-directed IRAs. If your LLC owns multiple investments, for example, the administrator will only make a single charge for the main LLC asset.
- More Control Over Your Investments
By starting an LLC with your self-directed IRA, you have the opportunity to use the business to make other investments. Instead of filing new paperwork for investment purchasing for each new investment, you can simply wire the funds or write a check for the purchase. You have full control over the timing and processing of the investment.
Making any type of investment requires that you take significant care and due diligence in the decision-making process. By owning an LLC, you are held liable for the practices and financial responsibilities of that business. You’ll want to research tax requirements, member limitations, registration availability, and annual fees within your particular state.
Learn More with iPlanGroup
Does a Checkbook IRA sound like a good fit for your investment portfolio? Schedule a FREE strategy session with the team at iPlanGroup today to discuss the opportunities available.