My article on IRA/LLCs for self-directed IRA investors was published by the California Lawyers Association, Section on Business Law, eBulletin. In the article I outline the benefits of an IRA/LLC, how to properly set-up an IRA/LLC, how the documents need to be restrictive over and above a standard LLC set-up, and discuss the cases where self-directed IRA owners have improperly operated the IRA/LLC.
An IRA/LLC is an investment structure whereby an IRA invests capital into a newly created limited liability company (“LLC”). The IRA owns the LLC units just like your IRA can own Coca-Cola corporation stock. This IRA/LLC structure has been popular amongst real estate investors and other investors who regularly invest in alternative assets with their retirement account. A common IRA/LLC structure is one where the IRA invests a designated amount of cash into the LLC in exchange for 100% of the membership units of the LLC. The LLC then in turn acquires the intended investment asset. For example, a rental property. An IRA/LLC can also be formed with numerous IRAs owning the LLC with the ownership allocated between the different IRAs based on the dollars invested.
Read the rest of the article on the California Lawyers Association website, here.