If you have a Self-Directed IRA LLC, the LLC will need its own EIN. When getting one, you need to put down an authorized user. However, the language will list you, the IRA owner, as the “sole member.” However, that’s not accurate since the IRA owns the LLC. Adam Bergman explains.
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IRA Financial Group was founded by Adam Bergman, a former tax and ERISA attorney who worked at some of the largest law firms. During his years of practice, he noticed that many of his clients were not even aware that they can use an IRA or 401(k) plan to make alternative asset investments, such as real estate. He created IRA Financial to help educate retirement account holders about the benefits of self-directed retirement plan solutions.

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Self-Directed IRA LLCs (Individual Retirement Arrangement Limited Liability Companies) have become a popular investment option for many retirement account holders. This type of IRA allows the account holder to have greater control over their retirement funds, as they can make their own investment decisions within the LLC.

One important aspect to consider when setting up a Self-Directed IRA LLC is obtaining an EIN (Employer Identification Number) from the IRS. An EIN is a unique identifier assigned to a business entity for tax purposes. In the case of a Self-Directed IRA LLC, the EIN is needed to open a bank account for the LLC and to file tax returns.

However, there are some quirks related to obtaining an EIN for a Self-Directed IRA LLC that account holders need to be aware of. The first quirk is related to the name of the LLC. The IRS requires that the name of the LLC reflect the fact that it is an IRA-owned entity. This means that the name of the LLC must include the words “IRA” or “Individual retirement account” in the title.

The second quirk is related to who is listed as the responsible party on the EIN application. The responsible party is the person who controls the LLC’s assets and directs its activities. In the case of a Self-Directed IRA LLC, the responsible party should be the account holder, not the custodian or trustee of the IRA. This is important because the account holder is the one who is making the investment decisions for the LLC.

Another quirk to be aware of is that the IRS may require additional documentation when applying for an EIN for a Self-Directed IRA LLC. This can include a copy of the LLC operating agreement and a letter from the IRA custodian or trustee authorizing the creation of the LLC.

It’s also important to note that Self-Directed IRA LLCs are subject to certain prohibited transaction rules. These rules prohibit certain transactions between the LLC and the account holder, as well as between the LLC and certain disqualified persons, such as the account holder’s spouse, children, or parents. Violating these rules can result in severe tax consequences.

In summary, Self-Directed IRA LLCs offer account holders greater flexibility and control over their retirement funds. However, obtaining an EIN for the LLC can be a bit tricky due to the quirks related to naming the LLC, identifying the responsible party, and providing additional documentation. It’s important to work with an experienced attorney or tax professional when setting up a Self-Directed IRA LLC to ensure compliance with all applicable rules and regulations.