Can I start an LLC with my self directed IRA?

[David Lee]

I was wondering if I could start an LLC with my self directed IRA. I was considering purchasing property with the LLC and loaning money to purchase property in the LLC. Does anyone know if this can be done? If so does anyone have any info on it? Thanks in advanced David Lee

[Jon Holdman]

You can create an IRA LLC. That is an LLC that's specifically created to be owned by your IRA. It has to have very specific verbiage in its operating agreement to comply with court cases that make this allowed. The IRA will be the one and only member of the LLC. You can be the manager.

However, all the usual rules apply. You cannot be paid by the LLC or your IRA. You cannot contribute your labor to anything the LLC is doing. You and the LLC cannot engage in any transactions. Nor can the LLC engage in any transaction with any other disqualified person or entity. If the LLC engages in an active business, such as fix and flipping or wholesaling, its subject to UBIT taxes.

I'm confused by this:

You could create an LLC owned by the IRA and have the LLC purchase property. There wouldn't be any loans between the IRA and LLC, though. Rather, the IRA would make an investment in the LLC. Same as any investor buying units in an LLC.

OTOH if you mean you would create an LLC that you control and have the IRA loan money to it then you would be engaging in a prohibited transaction. Your IRA cannot loan money to you or any entity controlled by you.