Individual Retirement Accounts (IRAs) have long been considered key tools of American retirement planning, while Limited Liability Companies (LLCs) offer investors flexibility in investing and protecting personal assets. Recently, financial experts and investors alike have discussed holding an IRA within an LLC as a potential strategy. In this article we investigate its feasibility, mechanics, and potential consequences.
Before considering holding an IRA within an LLC, it's crucial that one fully grasps both financial tools. An Individual Retirement Account (IRA) provides tax advantages specifically for retirement savings while LLCs combine elements from both corporations and partnerships, with limited personal liability exposure for members.
Traditional IRAs are held by custodians that make investments on behalf of the owner; however, an alternative known as Self-Directed IRA with "Checkbook Control" allows investors more direct control of their IRA investments. Under this structure, an LLC established through which an investor funds an IRA acts as manager. Essentially this gives an investor more efficient investment decisions as their money is managed across both accounts simultaneously.
Holding an IRA within an LLC through the Checkbook Control model offers investors greater flexibility yet poses several unique risks and complications. Because its legalities remain unclear, potential investors should conduct extensive research before making decisions that could have long-term ramifications on their retirement investments. With proper guidance and due diligence applied throughout, however, this strategy could prove fruitful when utilized to achieve direct control over retirement investments.