Is a checkbook manager recommended for an LLC owned by a SDIRA?

[Chris Policicchio]

I am in the process of setting up a self-directed IRA and then an LLC so I can have checkbook control. I want checkbook control to avoid the fees associated with money going in or out of the IRA. While vetting a few attorneys who can help setup an LLC, one recommended that I have someone else (e.g. a friend) officially manage the checkbook. I will have a property manager, but I am not entertaining the idea of them having checkbook access or control. The attorney indicated that the IRS tends to target LLCs of Self Directed IRAs where the IRA owner is also the single member of the LLC.

I'm only going to have one property (rental) in the IRA. Rent checks will be coming in. At some point, I will make some improvements to the property and I'll have to pay some other bills (e.g. taxes) but for the most part, there is going to be little activity. I don't think the extra layer is worth it. Does anyone have any thoughts or recommendations?

Anyone out there have a similar setup?  Are you managing the checkbook?  Or is someone else?

Thanks in advance!

[Brian Eastman]

@Chris Policicchio

The administrative activities of signing contracts and dealing with expense and income transactions should not create any kind of issues with the IRA. We have established checkbook IRA LLC programs for 12 years and have setup many thousands of such plans. Our client - the IRA account holder - is always the LLC manager. That is really the whole point of checkbook control. We have had a handful of clients audited and the self-management of the LLC has not been an issue.

[Dan Mahoney]

I'm a little confused what you are trying to accomplish here. I'm not a lawyer and I can't give you legal advice. But it seems to me that managing your IRA assets and pretending that someone else manages them is a bad idea.

[Bernard Reisz]

@Chris Policiccho I've got a client with this set up and there is some value to it. However, as @Brian Eastman posted, it's uncommon. Also, the benefit lies in the fact that having a third party managing the LLC makes it harder for the IRA account owner to inadvertently engage in a prohibited transaction and disqualify the IRA.

[Chris Policicchio]

Thanks

Originally posted by @Brian Eastman:

@Chris Policicchio

The administrative activities of signing contracts and dealing with expense and income transactions should not create any kind of issues with the IRA. We have established checkbook IRA LLC programs for 12 years and have setup many thousands of such plans. Our client - the IRA account holder - is always the LLC manager. That is really the whole point of checkbook control. We have had a handful of clients audited and the self-management of the LLC has not been an issue.

 Thanks a lot for the info @Brian Eastman.  I sent you a colleague request to inquire more about your services.

[George Blower]

@Chris Policicchio

Since PA is one of those states that does not offer full creditor protection to IRAs [see 42 Pa. C.S.-Sec. 8124(b) (1)(vii), (viii) & (ix)], the LLC route may make the most sense

[Angela Russo]

I know this post is older, but is it possible to get checkbook control in the IRA (Roth in my case) without setting up an LLC?

[Dmitriy Fomichenko]

Originally posted by @Angela Russo:

I know this post is older, but is it possible to get checkbook control in the IRA (Roth in my case) without setting up an LLC?

Angela, without an LLC your IRA funds will be in the custodial account of the trust company or custodian, you will not have direct access to the funds and would have to do through custodian for every investment and investment related expense.

[Angela Russo]

@Dmitriy Fomichenko 

Thanks for the quick response! That was the answer I thought I was inferring from the conversation, but glad to get an answer in black and white.

What are the rough fees for setting up the LLC? And I assume that the set-up fees also have to be paid by the IRA funds?

Does doing this in a Roth add any other layers/ complexities/ differences?

[Dmitriy Fomichenko]

Angela,

The fees vary from approximately  $1500 and up depending on the service provider. Identify few companies and contact them directly to learn about their fees and details of services offered.

Yes, the fee can be paid out of an IRA. There is no difference in the set up between Roth and a Traditional IRA, the process would be the same.

[Carl Fischer]

@Angela Russo

The LLC fee should be paid out of the Ira.