How to Do It Yourself: Self-Directed IRA for an LLC


Using a self-directed individual retirement account can provide you with the opportunity to choose your own investments and branch outside the normal spectrum of securities offered. By setting up a self-directed IRA in conjunction with a limited-liability company, you can essentially handle your own investments by writing checks from your LLC. This makes the process of investing in securities much simpler when compared with the traditional way of investing through an IRA.

Set up an account with a custodian. A custodian is an entity that administers your self-directed IRA for you. When you set up an IRA, you must use a custodian to handle the funds for you so that you are not in violation of any Internal Revenue Service rules. You can find a custodian by talking to your local bank or investment broker. In many cases, you can also sign up with a custodian through its website.

Fund the self-directed IRA. This can usually be done by writing a check to the custodian or by transferring money from your bank account to your IRA. You will need to wait on the money to clear the account before moving onto the next part of the process. Your custodian may also have minimum amounts that can be transferred to an account.

Create a limited-liability company. This can be done by a form called the articles of organization with your state. You will also have to pay a filing fee of up to $800, as of 2011, depending on the rules of your state.

Draft an agreement to invest in your LLC. The agreement will have to include the name of your LLC, the name of your IRA and the percentage of the LLC that your IRA will own. It is usually simplest if you make the IRA own 100 percent of your LLC.

Invest through your LLC. You can do this by writing checks for investments. Then when your LLC makes money, you pass the profits along to your self-directed IRA.

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