Single-Member LLC's in an IRA. Should I, or shouldn't I?

One of the more popular questions that I receive when potential clients call in for information is: Do I need to set up an LLC to invest with a Self-Directed IRA? Depending on where you get your information (and who is in line to benefit from you forming an LLC), you may be led to believe so. The fact is, though, that all of our clients self-direct their accounts, and only a small fraction (about 15%) actually set up LLC’s. Truth be told, there is not much reason to justify the additional expense of forming an LLC in most cases. Some self-directed IRA custodians seem to heavily promote the single-member LLC option, and at a hefty fee. Before shelling out the money to do so, please be sure to take the time to do your research as to whether or not this option is best for you. Also, be aware that those clients of ours that do form an LLC within their IRA typically do so by working with their trusted Attorney and paying a fair fee, as opposed to paying the inflated price that certain IRA administrators may charge.
The reason that one may want to look into forming a single-member LLC is if they feel that they will be frequently buying and selling assets within their IRA. This does not accurately describe the bulk of self-directed IRA investors. The idea is to minimize transaction costs that are associated with using your IRA to invest. Those that may fit the bill would be clients who plan on frequently purchasing and selling assets such as tax deeds and liens or foreclosure properties. If this describes your potential situation, I would strongly recommend contacting our office or your own accountant to discuss, as there are very good reasons to want to stay within IRS guidelines. While we are not able to give legal or tax advice, our managing member Dave Owens is a great resource for those looking for information on this topic and many others. Dave has an extensive background as a CPA, as well as a personal self-directed investor.
At Entrust Freedom, we can promise you that we will make all of the pertinent information available to our clients and prospective clients. In addition, we will help you to make your own decision as to how to best minimize your fees. I don’t know of any other self-directed IRA company that will make those promises. Again, I encourage you to do your own research as to whether or not a single-member LLC is right for you, and don’t hesitate to call our office with further questions. We can be reached toll free at (866) 839-0429.