An individual retirement account (IRA) limited liability company (LLC) can be a great solution for savvy investors who want a hands-on approach to investing. It offers plenty of benefits you won’t get from a typical self-directed IRA (SDIRA), like asset protection, faster transactions and potentially lower fees. That said, an IRA LLC has prohibited transactions to avoid. Learning what you can and cannot do with the account can help you avoid penalties and enjoy a smoother investing experience.
What Is an IRA LLC?
A self-directed IRA is an IRA you can manage through a custodian. With an SDIRA, you can invest in alternative assets. An IRA LLC is a type of SDIRA that gives you more transactional freedom, where not every transaction needs to pass through your custodian.
Establishing an LLC through your IRA means you can purchase assets directly by issuing checks from your IRA LLC checking account. This is why an IRA LLC is also known as a checkbook IRA. Because the IRA owns the LLC, the account will still keep its tax-deferred or tax-free benefits.
A checkbook IRA applies to single-member LLCs. Your IRA owns 100% of the LLC, while the LLC holds the assets. Although you’re the sole IRA account holder, you can hire third-party services to help you manage your LLC. For instance, if you’re investing in real estate, you can hire workers for the property or pay vendors for supplies. You cannot work on your property directly.
The bank account for your LLC will be funded by the IRA. This funding is not taxable as long as you use the money for investment-related expenses. In some cases, you may be able to combine multiple IRAs into one LLC and use a single checkbook for multiple accounts. The same contribution limits apply. In 2025, the annual contribution limit to an IRA is $7,000. The catch-up contribution limit for those aged 50 and up is $1,000.
Benefits of an IRA LLC
An IRA LLC offers additional benefits compared to a typical SDIRA:
- Speedy transactions: Because investment-related transactions no longer need to pass through custodians, you enjoy faster transactions and more control over your assets. You’ll only need your custodian for IRA contributions and distributions. This is so your custodian can properly report the transactions to the IRS.
- Asset protection: State laws provide protections for LLCs. This protects your personal and IRA assets from liabilities. For instance, if your LLC gets sued by a tenant of your IRA LLC’s property, they may only be able to go after your IRA assets. Additionally, your IRA LLC assets can be protected from your personal actions or investments.
- Increased privacy: Because your IRA owns the LLC, your personal information is kept out of the asset information.
- Easy rollovers: You can roll over your current IRA into your IRA LLC within 60 days of receiving a distribution. This helps you avoid paying taxes for withdrawing funds, unless you have a Roth IRA or are eligible for an exception. Just keep in mind that you can only roll over once per year.
- Lower fees: You can potentially get lower fees since the custodian no longer needs to manage the transactions for your assets.
Drawbacks of an IRA LLC
To get a better picture of whether establishing an IRA LLC makes sense for your investment strategy, consider these drawbacks:
- Limited use of your assets: An IRA LLC has a lot of prohibited transactions, including any transactions that may benefit you directly. For instance, you cannot use the property your LLC invests in, unlike if you personally invested in a rental property. You also cannot perform repairs or do landscaping on your property — you’ll have to hire third-party professionals.
- Varying LLC requirements: LLC rules vary by state, and you need to be knowledgeable of these requirements. You can work with a custodian who is well-versed in the state you plan to open an account in. Be mindful of what makes a compliant operating agreement, how to obtain an employer identification number (EIN) and the costs associated with establishing an LLC.
- Fewer banking perks: You cannot have credit cards for your IRA LLC.
- No compensation for managing the account: Because you cannot personally benefit from your LLC’s assets, you cannot get any form of compensation from managing the account.
Prohibited Transactions for an IRA LLC
The purpose of an IRA is to help you save for retirement. The prohibitions are there to discourage you from using the account for anything other than this purpose. To avoid getting your account disqualified, taxed and penalized, use this prohibited transactions list for IRA LLCs as your reference when managing your account:
- Self-dealing transactions: You cannot benefit personally from the IRA LLC, aside from the fruits of your IRA’s growth. This is known as the “exclusive benefit” rule. For instance, you cannot get a loan from your IRA or purchase a vacation rental for your personal use. You also cannot sell an asset you own to your IRA.
- Transactions with disqualified persons: Disqualified persons include members of your family, such as your ancestors, spouse, descendants and the spouses of your descendants. This rule applies to entities you or other disqualified persons own if you own at least 50% of this entity.
- Active work: Actively working on the LLC’s assets — for instance, on the business property — is considered a noncash contribution and is prohibited.
- Certain investments: Although IRA LLCs are great for alternative investments, certain investments are still not allowed for your IRA. This includes collectibles, life insurance and stock in an “S” corporation if it enables your IRA to become a shareholder.
All prohibited transactions applicable to SDIRAs are applicable to IRA LLCs.
What You Can Invest In
Apart from knowing the list of prohibited IRA LLC transactions, learning the assets you can invest in can help you optimize your investment strategy. Here are your options:
- Real estate
- Private equity
- Precious metals
- Private loans
- Trust deeds
- Tax liens or tax deeds
- Cryptocurrency
Real estate and private equity are the most common, but your choices ultimately depend on what your custodian offers. However, compared to traditional and Roth IRAs, you can get more opportunities with an IRA LLC’s alternative options.
Create an IRA LLC With Accuplan Benefits Services
Accuplan can help you get started in setting up your checkbook IRA. We are authorized and regulated by the IRS in all 50 states, so our team of experts can help you regardless of where you are in the U.S. We’ll discuss your needs and goals during the free consultation and explain how our team will play a role. We can then set up your account, help write the LLC operating agreement, file the necessary paperwork and assist you in establishing your LLC’s bank account.
We’ve worked with investors for decades and handled more than 10,000 accounts with over 40,000 assets. You can count on our track record of reliable service. Contact us today to learn more!
Disclaimer: Our information shouldn’t be relied upon for investment advice but simply for information and educational purposes only. It is not intended to provide, nor should it be relied upon for accounting, legal, tax or investment advice.
