Here are some stipulations to keep in mind when it comes to LLC checkbook control: Withdrawing funds. If you have a self-directed IRA LLC and are over 59 ½ years of age, you can withdraw funds from the IRA at any time without dissolving the LLC to access them. IRA distributions will be taxed depending on the type of IRA the LLC is held under (e.g., Traditional versus Roth). Prohibited transactions. Certain transactions cannot be carried out by a disqualified person when it comes to LLC checkbook control. It’s important to be aware of prohibited transactions, as they can cause penalties and can even result in the disqualification of your IRA. For instance, purchasing a condo through your IRA LLC for personal purposes as well as an investment property with your IRA would be a prohibited transaction Share ownership. Investors who control 50 percent of a small business (an LLC), can’t buy shares in the company with an IRA because you already own and control the LLC. Therefore, the LLC is a disqualified entity, and any transaction with the LLC is prohibited. Personal guarantees. Investors aren’t allowed to do a personal guarantee for loans to an LLC owned by their IRA because a personal guarantee could be viewed as an extension of credit to the LLC. Partner purchases. An IRA LLC partner and a non-IRA LLC can partner on a real estate purchase, but only at initial purchase. Expenses and income must be allocated according to the percentage of ownership as well. Prohibited purchases. While the IRS does not have a list of approved investments for retirement plans it does list what is not allowed as an investment. Included in that list are collectibles such as art, antiques, gems, and coins, as well as alcoholic beverages and certain precious metals. Life insurance (see IRC Section 408(a)(3)) is on that list as well. Also, trusts that qualify as an IRA are not eligible to be shareholders of an S corporation (see Revenue Ruling 92-73). Purchasing IRA LLC property holdings. If an IRA owns an investment, the IRA holder cannot purchase the investment from the IRA. The investment can, however, be distributed in kind and re-registered under the IRA holder’s name. Real estate loans. The IRA LLC can get a non-recourse loan to purchase real estate. However, not all banks offer non-recourse loans. Contact us for a list of providers that our clients have used. Member share ownership. The IRA does not need to own all of the member shares of the LLC. It can partner with anyone at the time of initial purchase on a newly created LLC. The ownership percentage will equal the capital contribution amount of each member. Once that initial investment has been made, the IRA cannot partner with a disqualified person as defined under IRS Code 4975. Start-up costs. The costs involved in forming the IRA LLC have to come from the IRA. In other words, the IRA needs to pay any amounts incurred to form the IRA LLC. However, be aware that paying with personal funds may be considered a prohibited transaction. Taxes. Investors are required to file taxes on the LLC in the IRA depending on the nature of the income received. For example, taxes are required to be paid if the income is from a trade or business. LLC Manager. The manager of the LLC can use the funds in the IRA to pay the earnest money and closing costs on LLC purchases. Property Manager. It is not advisable for the manager of the LLC to perform property management functions when that manager is the owner of the IRA. This is because services performed by a disqualified person for an investment held under the IRA are considered prohibited transactions as outlined under IRC 4975.