The IRA Owned LLC, A Great Potential for Investing
"So many investors are tired of watching their retirement
accounts dwindle away from the lackluster performance of the
stock market, while the value of their home and surrounding
areas increase in the double digits," said Marco Caporale,
President and CEO of Independent Executive Management, LLC.
Although using your retirement account to purchase real estate
does offer the potential for two to three times the annual
appreciation of traditional stocks, it does come with a lot of
regulations and severe penalties, if not correctly applied. That
is why the right account has to be set up.
If you read this far you are thinking, "All I have to do is open
a self-directed IRA." However, to truly set your IRA free, there
are a couple of simple steps that will give you checkbook
control of your IRA and profound asset protection that you may
not otherwise enjoy. First of all, most custodians, even true
self directed custodians, require massive amounts of paperwork
and numerous hoops to jump through in order for you to invest
your IRA money in an "alternative" investment. This costs you
time and money (custodian fees). To more effectively use your
IRA, your IRA will instead place all of its assets into a
limited liability company (LLC). Therefore, there is only one
asset to manage by the custodian and this means fewer fees to
you.
Why an LLC? The LLC gives great asset protection and tremendous
tax advantages. The LLC enjoys the asset protection of a
corporation while it can be taxed as a partnership. Partnership
taxation is great because the LLC itself will not pay taxes.
Instead, the owner of the LLC pays taxes as if they earned the
income. Who is the owner of the LLC? That's right, your IRA (a
tax- exempt entity). Therefore, you can maximized your
investment and pay no taxes, what a deal. Is the concept of an
IRA owned LLC legal? Yes, and the case Swanson VS. The
Commissioner in 1996 cleared up any doubts that anybody had
about this issue. In this case the court rejected the IRS
position that the business structure constituted a prohibited
transaction. The IRS was so wrong that the judge had the IRS
refund legal fees to Mr. Swanson.
How can you create this magnificent business structure to
increase money for your retirement years? Here are the simple
steps: 1. Open a self-directed IRA. 2. Transfer your IRA assets
to the new, self-directed IRA account. 3. Establish a LLC. 4.
Apply for your LLC's employer's identification number (EIN). 5.
Set up a brokerage account or bank account for your LLC. 6.
Instruct the custodian to place the IRA assets into the LLC
brokerage account or bank account. 6. Start investing in what
you know. Author: J McGlothlin.