Step 1: Sign Agreements for a Self-Directed Checkbook IRA
Sprout will handle the complete process of setting-up your Self-Directed IRA LLC. The entire process can be completed online using electronic signatures and can be completed in just 3-4 weeks. The set-up time mainly depends on how quickly you can setup a business checking account with your preferred bank and on the speed of your current custodian to process the transfer of funds. Our experienced team have many years of experience and will help you significantly reduce the cost and set-up time.
Step 2: Transfer Retirement Funds Tax-Free
The Sprout team will help you transfer your retirement account from your existing custodian without any tax consequences to a new passive custodial account.
Step 3: Setup Checking Account for IRA-owned LLC
Any financial institution of your choosing may be used to establish a business bank account for your IRA LLC, including banks, credit unions or any other financial institution.
Step 4: Transfer Funds Tax-Free to new Checking Account
You will instruct your custodian to move the funds from your IRA to the newly established IRA owned LLC checking account. Remember, that the IRA is the member of the LLC and you are non-member manager.
Step 5: Checkbook (Complete) Control
Manager’s title of your IRA owned LLC gives you the ability to make investment choices. Simply speaking, you retain “checkbook control” of your retirement account, which, in turn, makes any investment as simple as check writing from your LLC checking account or directing the bank to wire the funds. When you are setup this way you can fund new deals in minutes instead of days.
Step 6: Tax-Deferred Investment
Because your Self Directed Checkbook IRA is now considered the member (owner) of the IRA owned LLC, all gains, profits or any other income produced by investments held in the LLC would typically go into your IRA free of taxes. As far as the taxes are concerned, the LLC is considered a pass-through entity, all gains, profits or any other income would not be taxed at the entity level, but rather at the owner’s level.
But keep in mind, according to IRC Section 408, an IRA is considered to be tax-deferred, which means that all profits, gains, and incomes of LLC investments would run into your Self-Directed Checkbook IRA without taxes until years later!