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Nabers Group – The world’s only full service retirement plan provider. Our core services are IRA LLC & Solo 401(k) account establishment.
IRA Association of America – A nonprofit Self Directed IRA & Solo 401(k) professional trade & education association.
My primary service is the setup of UNLIMITED RETIREMENT ACCOUNTS®, those which allow unrestricted investment choices. Popular investments include real estate, mortgage notes, private stock, debt instruments, foreign assets, margin brokerage accounts, etc.
Solo 401k
This is a qualified plan for those who own or run a business which has no employees. This package includes preparation of the adoption agreement, basic plan document, EGTRRA Amendment, Summary Plan Description, Trust Agreement, Roth Provisional Amendment, RMD Model Amendment, and 401(k) Final Regulations Amendment. It also includes a newly assigned Employer Identification Number from the IRS, and an IRS Determination letter stating that this is a Prototype Plan pre-approved by the IRS to be a qualified plan.
This plan will allow annual contributions of $49,000 from each participant, $16,500 of which can be into a “Designated Roth Account” which we will create within your documents. A participant’s spouse can also contribute another $49,000 as well. Solo 401(k) plans are exempt from UBIT taxes related to debt leveraged real estate income and gains.
Built into this structure is the option for the account owner to name themselves as trustee of the plan, achieving “checkbook control” without the additional cost or paperwork of creating an LLC.
To summarize, a Solo 401(k) has the same functionality of an IRA LLC (including accepting incoming rollovers from existing accounts) plus these additional unique benefits:
- Higher contribution limits (currently $46,000 per year – or $51,000 per year if over age 50)
- Participant can take a loan of up to $50,000 for any reason
- Exempt from UDFI (a type of UBIT tax an IRA pays when it owns mortgage financed real estate)
- No income restrictions for using a Roth sub-account
- No requirement for a third party custodian – eliminate delays and administration fees
IRA LLC
This structure has become a popular choice for gaining “checkbook control” of an IRA. An IRA is opened and funded at a custodian. A Special Purpose LLC is created, and the account owner directs the custodian to purchase and fund the LLC, which is managed by the IRA owner. The result is that the accountholder has a legally allowable (substantiated through case law) method of transacting at the LLC level without needing to involve the custodian. This method is often used to reduce time spent processing transactions (signing contracts and checks, sending wires, etc), and it also allows the accountholder to eliminate transaction-based fees from the custodian after the initial funding of the LLC.
Our Turn Key IRA LLC includes preparation of Secretary of State Articles of Organization, Operating Agreement, and Organizational Minutes specific to your LLC. These documents include special language designed to allow for a retirement plan to have ownership of the LLC. You will also receive a corporate binder, seal, and ownership certificates customized for your LLC. This is ready-to-use. All you have to do is follow the included instructions to open your LLC checking account at your favorite bank.
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Comments»
I am interested in setting up a checkbook IRA. It seems very clear of what one can do with the cash once the account is operational. My question is, must you sell the “other” assets (stocks, mutual funds) converting them to cash before you transfer from another custodian, or can these assets be transfered also?
I’m self employed and would like to begin funding a solo k plan. I’m 61 and need to get moving. What are the fees for the plan?
I sold some investment property that I personally owned to my brother. I now want to buy it back using funds from my IRA. Is this a prohibited transaction?
@Michael – Transfer of non-cash assets is not impossible, but liquidating securities makes the process much easier.
@Lynn – Thanks for your interest. Check your email.
@Phllip – If this ultimate result was never conceived or intended, buying the property back in your IRA might not be a prohibited transaction. However, that may be a difficult case to argue. If the ultimate result of getting it into your IRA plan was conceived or intended at the point at which you decided to sell the property to your brother, then directing your IRA to now buy the property from your brother would likely be a prohibited transaction.
Hey Jeff. What are your thoughts on putting a self directed IRA with a company that invests in forex and real estate? The company I’m thinking about keeps precious medals as their reserves and does professional private placements.
I have a self directed IRA LLC created by an attorney specializing in this. I have purchased properties in Mexico and would like to form a partnership with two other investors to buy more property down there. I have been given two options by a mexican attorney and would like to know if I can keep my LLC up here and report taxes on my share of ownership in the corporation in Mexico without breaching any IRS rules. Here are the two options I have been given by the attorney. I would have a majority share in the corporation and be the manager of the business. I would like to know if I can do this.
n.1: YOU CAN CREATE AN AMERICAN LLC AND WE CAN MAKE THE AMERICAN LLC COMPANY AS SHAREHOLDER AT 99% OF THE NEW MEXICAN CORPORATION (AND1% OF THE MEXICAN CORPORATION INTO YOUR NAME). THEN INTO THE AMERICAN CORPORATION YOU CAN SPLIT THE SHARES WITH ALL THE INVESTORS AS YOU CONSIDER, AND YOU WILL BE THE GENERAL MANAGER OF THE MEXICAN CORPORATION;
n.2 WE CAN MAKE THE INVESTOR DIRECTLY AS PART OF THE NEW MEXICAN CORPORATION WITH JUST 40% WITHOUT ANY EXTRA CORPORATION, AND GIVE TO YOU THE GENERAL MANAGEMENT.
I would appreciate any guidance and help in this matter. I have an accoutant who also specializes in IRA LLC investing but everything is getting so expensive. Does anyone have experience with this?
@Chris – I think it’s worth looking into. Some people are capable of making tons of money in ForEx or real estate with very little risk. It all comes down to who the issuers are of these private placements. They may very capable, or they may be just hopeful and ambitious. That’s up to you to figure out.
Diane,
I don’t clearly understand what you are laying out. You mention an American LLC, and then later you mention “the American Corporation”. Are these one in the same?
And when you say you have a majority share in a corporation, do you mean you or your IRA?
In the area of Mexico you are focusing on, can an American LLC buy real estate directly?
Hi Jeff
I have found your site and IRAAA very helpful and beneficial. I am planning on being in Denver in October. I am working with a couple of guys who are investing in Real Estate in Michigan. One is a contractor and one is a Real Estate Appraiser and Broker. They want to create IRA-LLCs to purchase Real Estate and flip the houses. The main issue is one wants to do this for pure IRA investment while the other wants to earn money from the flips immediately. I was thinking about this and thinking maybe the one that wants to earn money now could just invest less than 25% in the LLC so that it was not a plan and then there could be ‘self dealing’ I have read some on this, but I would like your comments regarding this and whether there are other options for these two gentlemen.
Thanks
Richard,
I don’t fully understand the exact circumstances, but I’m confident you will be able to arrive at a useful perspective with the help of the Prohibited Transactions Guide Book you just ordered.
Just a brief note: making an entity under 25% owned by a plan (to make it not a plan asset) or under 50% owned by a disqualified person (to make the entity itself not a disqualified person) does not allow a person to direct their IRA (or IRA LLC) in any way that involves a disqualified person and a plan (directly or indirectly) in a way that could affect the judgment of the fiduciary.
With the recent turmoil in the banking industry and wall street, I have been thinking about rolling over my past employer 401K into some sort of self directed ira or llc to invest in real estate or r.e. related investments.
Since my 401k is not large enough to buy properties outright, and the use of normal financing methods to purchase would then limit me to just investing in a few properties, thereby increasing risk, I would be interested in some sort of self directed retirement account that would allow others to rollover their past employer 401k’s into some sort of tax deffered joint entity with me, large enough to purchase real estate outright if needed.
I swear I read about this somewhere but I cannot find anything on this anymore. Any ideas?
Thanks in advance!
Ric,
You’ve made an important observation. Most people’s IRA/401k plans do not have enough funds to hold a portfolio of real property owned outright.
I have proposed an alternative to ignoring diversification: Read about it here:
- The cost of isolation
- Huge risks for huge returns: A good idea?
- Increasing buying power
- Eliminating securities problems Part 1
- Eliminating securities problems Part 2
My company has a 401K plan with about 15 or so employees and I want to have a self-directed IRA for myself, is this possible.? I got you name from Tom Phelan who is in Argentina at the moment. I would like to invest my 401K money into offshore real estate. My wife has an IRA from a previous marriage and employment and she would like to get into a self-directed IRA as well.
Thank you for your time
Tom,
If your 401k will allow for in-service transfers/distributions, then you can transfer some or all of your 401k account funds into a self directed IRA.
We’ll be more than happy to walk you through the process. For starters, just give us a call at 877-903-2220.
Jeff
Greetings!
Seems the more I read, the more confused I get about PT and entity structuring. Can I do Scenario 1: Create a C Corp that buys and sells real estate. I would take a reasonable salary as an employee. I would personally own 5% of the C Corp and my self-directed IRA would be a shareholder at 95% of C Corp. Scenario 2: C Corp, same type of business, husband shareholder at 5%, wife shareholder at 5%, husband’s self-directed IRA owns 45% of C Corp and wife’s self-directed IRA owns 45% of C Corp. Both H/W take a salary from C Corp.
@ Bill – The short is answer is no to both scenarios, however, we may be able to accomplish your objective with a more thorough conversation. At your convenience call my office at 877-903-2220.
Jeff
Hello Jeff,
I would like to transfer 126K from my IRA to self-directed IRA so that I can buy a rental house. Can you help me how to do it
Hi Jeff,
Is this possible?
1- Form an ROTH IRA.
2- Organize a Special Purpose LLC.
3- Instruct my IRA to invest 95% with the other 5% being owned by a brother in law of the Roth IRA owner
4- The LLC would be formed to help home owners prepare their houses for market.
5- Have the owner of the IRA run the LLC
6 – Have the owner of the IRA also receive a small salary for his work that he provides the LLC
7 – Can you help do all this?
8 – Can ownership of the LLC by the IRA be 100%?
Thank you in advance for all your help and insights.
Sincerely,
Rich
@David Vu – Absolutely; Call my office at 877-903-2220.
@Richard – Some of what you described is possible, and some of what you described is problematic. It will be much easier to walk through this scenario and assist you if you would call my office as well at 877-903-2220.
Hi Jeff,
My wife and I currently have 2 Self Directed Roth and 2 Self Directed traditional IRA’s through Sterling Trust that we have invested in Perth Mint metal certificates. I have recently read (with much consternation and anxiety) of some proposals from Nancy Pelosi and others in Congress to essentially take over or nationalize all 401k and IRA accounts in an effort to “protect” the retirement proceeds of Americans. It might involve incorporating them into Social Security, or something else, in order to “spread the wealth.” My questions are: 1) Would an IRA LLC provide some protection from such an event, and 2) Could the IRA LLC be funded without cashing out the current investments, ie. transfer the certificates intact from current IRA’s to the new IRA LLC? Your thoughts and ideas would be most appreciated.
Sincerely,
Mike
JEFF: I own a lot in a high-end neighborhood….outstanding loan of $142,000 but valued at between $180-225,000. Is there any way to either transfer this property into an IRA LLC (Texas) OR utilize funds from the IRA LLC (Texas) to purchase this property.
I have a builder that wants to partner with me but the lot must be “paid-up”, title free & clear. The builder would be using cash to build the house. My part of the sale would equate to at least $175,000 but could be as much as $225,000. It would be a very good long-term investment for my IRA LLC (Texas)….what do ya think?
Are assets held in a self directed IRA protected in bankruptcy?
This are great questions. I share your concerns. Yes, I believe a self-trusteed Solo 401k or IRA LLC would give you the opportunity to distribute your plan assets to yourself in the event of a retirement account governmental confiscation. However, you can’t transfer the metal certs for your old IRA into your new IRA LLC or Solo 401k… but you could replace them with physical possession of metals in coin form. If something as drastic as government confiscation of retirement assets happens, there will be so much turmoil you might prefer physical possession anyways.
No sugarcoating… no. You cannot do anything to involve a personally owned property in your plan. Your retirement plan can only buy assets that don’t already involve a disqualified person (which includes you). Thankfully, every single day is full of even more opportunities than the previous. If you want to learn more about what you CAN do, please call my office at the number at the top of this page.
Somewhat. This question could appropriately be directed to an attorney in your state.
Jeff,
You stated in your April 9 note on gold purchases:
“So when it comes to Self Directed IRAs and Solo 401(k)s, it appears that American Eagle coins are allowable for both types of plans. Further, a retirement plan can (through a custodian as trustee) own certain bullion, but cannot do so with checkbook control plans (an IRA LLC or a Solo 401k that is self administered and self trusteed). This appears to offer a benefit to having your transactions handled by a custodian because doing so would allow for ownership of certain bullion ”
Question: How do you recommend a person holds/stores American Eagles within a Self Directed IRA to prevent the type of confiscation possible. Can you take possession?
I am considering the bullion option (through GoldMoney.com & a custodian) and hold it in Switzerland. What are your thoughts on foreign storage to prevent confiscation.
David,
In a time where government confiscation of anything is being talked about (search Google for “guaranteed retirement account”), it makes a lot of sense to take possession of hard assets.
With a Solo 401k or IRA LLC you can take possession of the coins you hold. The catch 22 is that it is convenient to have GoldMoney.com or a custodian hold your gold for you, but in the event of some major economic failures (when hard assets may be the only thing retaining value), then your gold is at a very high risk if it’s in somebody else’s hands. At a custodian, they are regulated by the government, so if the government wants to “nationalize” your retirement assets, the custodian will comply. Having a Swiss holding facility care for your gold may be better than a custodian, but it’s still not as secure as direct possession.
Jeff,
Great advice here. I was considering opening a Solo 401(k) with TD Ameritrade or Charles Schwab until i read your post and now I am confused and unsure…
I have a couple of questions:
1. If I do open a Solo 401(k) with let’s say $15K and I have another $60K in a Traditional IRA, will I be able to transfer the full IRA into my Solo 401(k) or is this transaction prohibited? It seems that EGRRTA allows it but I cannot tell for sure.
2. What is the difference between a plain Solo 401(k) and a self-directed Solo 401(k). If I do open my account with a broker, can I later on make it a self-directed one without them being the custodian? I will be the trustee myself from the beginning but I have to deposit my money with someone, no?
Alex,
1. Yes, some or all of a traditional IRA can be transferred into a Solo 401k. What amount of percentage is entirely up to you.
2. “Self Directed” is somewhat of a misnomer because those who pursue “self directed” IRA or 401k plan usually aren’t simply looking for the ability to direct their investments; rather, they are looking for the ability to direct their investments with little or no limitations on investment choices. If you setup a Solo 401k at a stock broker (aka financial planner), then you will not be the trustee, and you will likely not be able to buy anything other than publicly traded securities. You can always restate your plan with a my company, Nabers Group, but I am not sure what you would gain by adding in the extra step of temporarily having a securities-only plan setup first. With our Solo 401k, we setup the plan, and then you can have as many checking accounts or brokerage accounts for your 401k trust as you like. For more info, call my office at 877-SOLO-401K.
Jeff
My wife and I currently have self directed IRA’s (no LLC or checkbook control) with American Estate and Trust. We are interested in a multi IRA-LLC (Texas) with checkbook control that all of the IRA’s can participate in.
Would we be able to do that through you? What are the fees?
Jim,
Yes. For more information, call my office at 877-903-2220.
Jeff
I own a LLC that builds custom homes. I want to roll my 401k to a self directed IRA (I have full time employees, so no solo 401k).
Can my builder LLC sign a fixed price contract to build a spec home for my IRA LLC? I would charge the same rate as I charge other customers, but it seems silly to have to pay another builder to build the spec home.
Can I take exception per tax code 4975(d)(2)
Prohibited Transaction Exemptions
“any contract, or reasonable arrangement, made with a disqualified person for office space, or legal, accounting, or other services necessary for the establishment or operation of the plan, if no more than reasonable compensation is paid therefor; “
John,
Unfortunately, that would constitute a prohibited transaction. 4975(d)(2) wouldn’t apply because contracting to you as a builder isn’t necessary for the establishment or operation of the plan. That exemption language points towards legal and accounting services. There are plenty of retirement plans out there established and operating without contracting to a builder.
Your proposed transaction provides two benefits:
1) The ROI to your IRA LLC
2) The business to your builder LLC
Unfortunately, you can’t legally kill both of these birds with one stone. You’ll need to keep your IRA LLC transactions separate from arrangements that involve you or any other disqualified person.
Lucky for you, there is a world of investment opportunities out there that don’t require your involvement, and I’d be happy to provide establishment and support services to help you pursue those opportunities. Call my office at 877-903-2220.
Jeff
Can I created an IRA LLC that would contract to build a house that I could later rent and/or buy as my personal residence? If this action is not allowed this way, then is there a way that the IRA LLC could basically accomplish the same goal in another way?
Hi, Tom. The act of directing your IRA to invest in any way that involves or benefits you or your family members, directly or indirectly, is prohibited and carries hefty penalties.
I would strongly urge you to focus on directing your IRA for investment purposes only. There are so many fantastic investment opportunities out there, that it can pay off handsomely to ignore the urge to create personal benefit or involvement.
Thanks for your website. I’d like to set up an IRA LLC with checkbook control, rollover existing IRA funds into the LLC, purchase gold coins with the funds and store the coins in a safety deposit box rented by the LLC at a local bank. In such a case, would the LLC be the custodian? Or the bank? Or another party?
Thanks again.
Tom U,
It’s easy to get confused in dealing with these topics. My company can everything up for you, allowing to you make use of our years of research and experience. Call my office at 877-903-2220, and we’ll walk through everything step by step. Before you make any decisions, I promise you will understand who is serving what role and why.
Jeff
Jeff,
I want to invest in a fixer-upper with my self-directed Roth IRA. My good friend has experience flipping (I don’t), is willing to partner with me on some deals (50-50), do the work and sub out what he can’t do, but he has no available funds. I don’t have enough money in my IRA to purchase a “good deal” that just came on the market. Can I loan him money with my personal funds (outside my IRA) and have him sign a secured or unsecured promissory note? He wants to be listed as half owner so he pays capital gains only. Would this be considered a prohibited transaction since I would be funding his half of the investment? Thanks for your help!
Jim,
In short, that is probably a prohibited transaction. See this post:
http://jeffnabers.com/2008/07/24/coinvesting-with-your-plan-partnering-with-disqualified-persons/
Jeff
Hey jeff,
Looks like your pretty active in answering questions and very helpful to others, i have a few questions myself. From reading i am trying to create a self directed ira. I am going to start up a startup company in a passthrough LLC with IRA funds which i am 10% owner and also worker, however i am not being paid a salary just paid by distrobution from company.
From everything i am reading this is possible. However i need clarification. At what point am i disqualified? Am i disqualified if i am an executive or managing director or hold a seat in the board?
Joshua,
You are a disqualified person to transact with your IRA all the time automatically. So are most of your relatives. You simply cannot direct your IRA to make investments that involve or benefit your directly or indirectly. There is a lot of misinformation on the internet about what is and what isn’t a prohibited transaction.
Call my office and we can walk through some scenarios that you can and can’t do, and hopefully we can find something that make you happy without putting you at risk of breaking tax laws. 877-903-2220.
Jeff
What happened to Oboma’s promise to allow one to borrow agains’t their IRA p to 10,000 without penality during these hard economic times??
sure,
tell me about your fees, whar state is cheapest to open an llc in, and what custodian is most economical….
@Will – The best way to get more information is to call my office at 877-903-2220. Thanks
If I give someone an acquaintance (not a business partner, family member, no joint ownership of any business) a second mortgage on his home through my SEP-IRA, could he also provide a second mortgage for me on m investment property? We would both be borrowing $100k. I don’t see any way that we would be considerd disqualified parties. Any experience with this type of loan “swap”
Fred,
There a big misconception about PTs out there. In my Prohibited Transactions Guide Book, I identify “Category A” prohibited transactions as well as “Category B” PTs. What you’ve described is a “Category B” Prohibited Transaction. Most people are completely unaware of the cat B rules. Check out the guide book.
Jeff
Is there any sites that exchange self direct assets for equal exchange of anothers assets in a self direct LLC?
Tom,
Not that I know of.
I am looking for a self directed IRA custodian to purchase (fund) my check book IRA LLC (to buy real estate or other businesses). I am looking for a low cost providor. Any information you can share?
Chris
Chris,
We can help. Just call my office at 877-903-2220. We’ll walk you through everything.
Jeff
Jeff,
I’m sorry i did not see your website sooner. You provide a lot of helpfull information about this hot topic, Self Directed IRA LLC. I want to thank you for that.
Is a self directed ira LLC required to file an annual return and if yes, what type of return does it file?
Gifty,
I appreciate the kind words. A single member IRA LLC is not generally required to file an annual federal tax return. A multi member LLC would file a Form 1065 partnership return unless that LLC had specifically elected to be taxed as a C Corporation which would need to file Form 1120.
Additionally, if the UDFI tax is triggered with an IRA (which a Solo 401k would be exempt from) then a Form 990-T should be filed.
My company provides expert support to our clients for whom we have setup an IRA LLC or Solo 401k. To learn more, call 877-903-2220.
Jeff
Hi Jeff,
I have two traditional IRA’s, from each I currently have an ongoing 72t (SEPP) withdrawal. Is it possible to rollover one of these to a form of IRA that would allow real estate investment while continuing the SEPP withdrawals (I am currently 54). I assume the Solo 401k form would not work, but wonder about another…
best regards Randy
Randy,
Here’s my guess:
You can do whatever you want with your funds as long as the particular IRAs that are involved in the SEPP make the SEPP payments.
In other words, you could probably roll some of those IRA funds into another IRA or Solo 401(k) as long as the payments are made out of the IRAs that are obligated to make SEPP payments.
This is what I suspect the answer to your question to be, but check with your CPA or whoever setup the SEPP payments.
Jeff
Jeff:
What is the cost to set up a self directed IRA to invest in tax liens?
And continuing costs.
Art,
The best way to get more information is to call my office at 877-903-2220. Rather than try to figure everything out by yourself in a matter of days or weeks, you can harness the several years of experience we have with this niche strategy. We look forward to helping you.
Jeff
In your blog article, you mention solo 401k’s are exempt from UDFI and define it as: “a type of UBIT tax an IRA pays when it owns mortgage financed real estate.”
I noticed this defintion on other parts of your site and I’m wondering why you are using such a limited defintion. Are you not aware of other types of UDFI or do you not think they are applicable? For instance, debt financed income from the sale of margined securities.
Regards
Hi, Lorn. I tend to focus mostly on alternative assets such as real estate, gold, and small business investments. In that realm, debt-financed real estate income is most relevant.
Thanks for your input
Jeff
Right, I understand what you think is applicable. My question was if you have basis for thinking other UDFI isn’t.
The confusion stems from your claim, which is that UDFI is exempt for solo-401k’s and only in parethesis mention debt-financed real estate. My point is that UDFI is not limited to debt-financed real-estate, regardless of your focus.
Is the code/ruling/counsel you’re referencing for this claim based specifically on debt-financed real-estate or all forms of UDFI? If it just pertains to real-estate, I would recommend not promoting your solo-401k as broadly as “UDFI exempt”, rather more specifically as “real-estate UDFI exempt” as it is misleading.
Case in point, based on the broad “UDFI Exempt” claim I have been trying to find what other forms of UDFI are exmempt and have come up empty-handed and suspect it may be real-estate specific.
Regards
Jeff,
You have by far the most comprehensive and useful information on this topic that I’ve found on the web. I am a practicing estate planning attorney and deal with tax laws on a regular basis, and I still find your knowledge and expertise in this niche area to be a tremendous resource.
I have two questions:
1) If I am eligible to set up a Solo 401(k), may I/my company make contributions only to the Roth component ($15,500/year) and not to the portion that will be taxable in the future?
2) I have a small Traditional IRA now and an even smaller Roth IRA. I intend to rollover the traditional IRA funds to the Roth in 2010. May I then rollover those amounts into the Roth Solo 401(k)? (Or if not, may I rollover the existing Roth IRA funds into the new Solo 401(k)?
Thanks,
Ethan
Hi, Ethan. Thank you so much for the kind words.
1) Yes
2) For some reason, the IRS does not allow rollovers or transfers from Roth IRAs to a 401(k) Designated Roth Account.
- Jeff
Hello Jeff,
I have a regular solo 401k with Fidelity. Asked them if I could take a Participant Loan, and they replied that it was not possible. Do I have the right to such a Participant Loan by law, or can Fidelity restrict this feature? Are there other large financial institutions (Schwab, etc.) that allow solo or individual 401k accounts that do offer the feature of Participant Loans?
thank you,
Daniel
Daniel,
Yes Fidelity can restrict anything about your plan because they formed the plan document and they administer the plan.
To get a participant loan, you would need to restate the plan using another set of documents. Optimally this new set of documents would name you as administrator. My company, Nabers Group, specializes in setting up plan documents that offer the most flexibility and usability allowed by law. To find out more, call my office at 877-903-2220.
Jeff
Jeff,
I have a self-directed IRA that can invest in RE. However, my major interest is in Canadian land properties. What form of IRA , in your opinion, would allow me to invest in Canadian Land (timber vs. agricultural).
Regards,
Peter Wes
Peter,
For assistance, please call my office at 877-903-2220.
– Jeff
Hey Jeff, great website.
What if I own part of another company that has employees yet I also earn self-employment income in my own company. Am I still eligible for a Solo 401k and do I need to offer the employees of the other company (of which I am a part owner) the opportunity to participate in my Solo 401k?
Bob, like with most detailed inquiries, it’s best to call my office at 877-903-2220. We look forward to assisting you
Jeff
I have some credit card debt to pay off. My friend is looking for cash for her business. With both have IRAs. Can her IRA loan me money and vice versa? Do we just set the terms like a usual promissory note?
Noel,
Doing what you described would be a prohibited transaction. You can’t chose to direct your IRA in a way that you expect to create benefit to yourself, no matter how many intermediary steps there are.
The good news is that the is a whole word of investment opportunities that don’t involve breaking the law. To learn more, call my office at 877-903-2220.
– Jeff
Jeff,
Can I use a solo 401k to purchase raw land and then use it to develop a residential subdivision.
Joe,
The answer is a bit more involved than a “yes, you can” or “no, you can’t.” I suggest you call our office at 877-903-2220 for more information
– Jeff
Jeff,
You have a lot of thought provoking information on your sites. They have inspired the following:
1) Does the solo 401(k) have income taxes at the corporate level (the business level prior to dividend payments to the qualified plan)?
2) Can the solo 401(k) purchase/create/operate an LLC in the plan level without the services of a trust-type intermediary?
3) Can the business transact business with an LLC (which is also fully owned by the solo 401(k) plan) without creating a PT?
Thanks….
Ooops….
4) Assuming that #3 above is not a PT, is #3 also possible when operating out of a Roth subaccount?
Thanks again!
Brent,
1) Corporate taxes are no determined by who owns the corporation, they are determined by the Corporation’s tax status. All C Corps will pay taxes on income. LLCs are “pass through” entities so by default they do not pay taxes. An LLC that elects to be taxed as a C Corp pays taxes just as a C Corp would.
2) Yes. There are no requirements for 3rd party intermediaries with any qualified plans. That requirement is only for IRAs.
3) I’m not sure what “the business” is you refer to in the earlier part of this question. Do you mean “Can one-plan owned LLC transact with another plan-owned LLC. Sure but why? If the “why” is to transfer income or assets disproportionately into a Roth account, it’s prohibited.
It sounds like you’re in the brainstorming stage. To save you years of research and potentially millions of dollars in mistakes, I encourage you to call our office at 877-903-2220
Jeff
Hi Jeff:
Can I use one of these IRAs to make a personal loan to my brother-in- law (all properly documented at market rates via virgin money)?
Thanks,
Phyllis
Phyllis,
The short answer is yes, but there is a longer answer that I recommend you understand before moving forward. Call our office at 877-903-2220 for more info.
Jeff
Hello Jeff,
Can a self directed IRA LLC purchase commercial real estate (a building) as an investment – rent it out for a while, and sell it outright to a different LLC at a later date if the LLC is owned by the same owner as the IRA LLC.
Thank you,
Tony
Tony,
Nope, that’s a prohibited transaction.
Jeff
I am an employee of a company, although I have been self-employed in the past.
If I set up a solo 401K plan and roll all my existing IRA assets into it, but don’t make any further direct contributions to it, what is the likelihood (and consequences) of the IRS subsequently disallowing it as a valid plan?
Hi Jeff,
I want to set up an LLC that will be owned by my solo401k. The purpose of this LLC is mostly for asset protection; I would use it to hold properties I acquire using subject-to and short sales. I read on-line that some states do not protect the owner of an LLC if there is only a single owner. As I understand it, this means my solo401k would not have the asset protection that an entity such as an LLC normally provides unless there is a second owner of the LLC. Am I correct? If so, I believe that I should be able to give a sibling a 5% share of the LLC until I set up a second LLC (again owned by my solo401k) then have each LLC own 5% of the other. Is this compliant with IRS rules on prohibited transactions? Also, would having two LLCs owning 5% of each other protect the assets that I grow within my solo401k?
Paul,
I’m not sure. You should only setup a 401k if you intend to contribute to it in the future.
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Thomas,
I think you are misunderstanding the real-world asset protection of an LLC. I will write a post on this soon. Make sure you subscribe to the RSS feed for my blog for real time updates.
Jeff
Can I roll a 401k into a self directed IRA and purchase my investment property that is currently mortgaged? I do not use this property, it is strickley for investment purposes. Once it is purchsed, do I handle it s the IRA beiing the onwer. In words, the rnets go into the IRA and the various expenses are paid out of the IRA?
I have a self directed IRA LLC setup. Initially I intended to buy some real estate but that never happened so I simply put the money into a business brokerage account under the LLC name. Is there information out there on how to file with the IRS at this point? As far as the brokerage company is concerned, they just know my account is a ‘business account’ and will report to the IRS as such. How do I document this when I file so that it is understood that the account is held by a trust which is tax exempt? Thanks.
BA,
These kind of involved, unanswered questions are the shortcomings of the IRA LLC facilitators who set people up and fail to provide the information on how to use them.
Nabers Group clients enjoy access to an expansive knowledgebase and community to answer these types of detailed questions, but this is unfortunately outside the scope of my blog.
Currently only Nabers Group clients who have setup a Solo 401k or IRA LLC with us are able to access our knowledgebase, but we may consider offering access as an a la carte subscription in the future. If so, I will announce it on this blog.
Jeff
I will follow up on the above message. Apparently there is a vacuum in this space w.r.t. what to do with your 401K/IRA LLC once you have formed it and funded it. As BS above, I have an Individual or Solo 401K, with a Roth option, with an administrator which has invested into a 401K LLC. This LLC owns a strip mall. The income from the strip mall goes back into the 401K LLC. Now which portion of this goes to the Roth and which to the taxable? Do you treat each side as separate accounts? Do you help with these types of questions or are these only addressed by ERISA tax lawyers? Or ERISA CPS’s. Any referrals?
Hi, William.
Yes, there is quite a vacuum in the self-directed investing industry as the money is made by setting up accounts.
I try to go beyond that and help as much as I can.
If your Solo 401k invested in a strip mall, Roth & non-Roth are treated as separate accounts. If 80% of the investment was non-Roth and 20% was Roth, then 80% of the profit distributions to the Solo 401k should be going into the non-Roth account and 20% should go into the Roth account.
Being “separate accounts” just means that you keep records on what is what. If you have an outside administrator and trustee, you are dealing with an unnecessary expense and complication, and you may find that you enjoy the lower cost and elimination of extra steps and paperwork if your Solo 401k was converted to a self-directed, self-administered, self-trustee Solo 401k.
Jeff
Jeff:
I am serious about setting up a Self Directed 401K to rollover my existing traditional 401K into. I received randomly your email and your intro video is very intriging. I am doing my due deligence in this process and know there are do’s and don’ts to this process. As your video is brilliantly crafted with a take away method of enticement I am curious to see if I will get a follow up from your company or more impressively from you.
I am a Real Estate Broker in Maui Hawaii and look forward to your contact back. Thank you for your time and research on this very benificial tool and avenue for small business owners in Self directed 401K. Sincerely, Kandi O’Brien, R, GRI http://www.discovermauiproperty.com or kandi@discovermauiproperty.com
Hi, Kandi.
If you consider this comment a follow up, then here it is!
Once you setup your Solo 401k, you will also have access to many coaching programs that can help you with your investments and business building.
And thank you for the compliments.
I glanced at your web site; that’s a beautiful picture tour on the front page.
Cheers,
Jeff
Jeff:
I’m very interested in setting up a Solo 401k for myself. My wife and I run a small internet business out of our home (no employees and all that). She and I each have a self directed IRA and Roth IRA. I also have a SEP-IRA. If I set up ONE Solo 401k is it allowable to have us merge all of our collective IRA funds into this (ie. my IRA and SEP for me, her IRA for spouse contribution, and the Roths going into their respective Roth sub-accounts)? I know it sounds complicated, but I’m trying to decide on whether to set up 1 account for cost efficiency, or 2 accounts (1 for each of us). Also, we have a trust structure as beneficiary currently — would there be any problems? Thanks!
Mike Eis
Mike,
1) All Solo 401k ‘participants’ can roll funds into the plan. Being a participant is a matter of doing work and receiving compensation from the small business that adopted the Solo 401k plan. And yes two participants (you and your spouse) can be in one plan.
2) Yes, a trust can be beneficiary of the Solo 401k.
You can get going in setting up your Solo 401k HERE
– Jeff
Jeff,
I know I cannot loan from my SDIRA to a spouse. But is it permissable to make a loan to my wife’s company (s-corp.)?
Many thanks, Howard
Howard,
Nope. You’ll need to stick to non-conflict-of-interest transactions.
Jeff
Jeff,
I am a Realtor that works with a partner in residential real estate. We have an LLC in which we are 50-50 owners of. We run our expenses and commisions through it. Further more I’m a minority partner of the real estate company which we hang our liscense and is setup as an LLC and has one employee. Am I a candiadate for a solo 401k?
Rob,
Your question is answered in the comments here:
http://www.jeffnabers.com/2010/11/14/the-most-elusive-dangerous-self-directed-ira-practice/
Take care!
– Jeff
Jeff,
If an individual currently has funds in an existing IRA and a ROTH IRA, my understanding from the posts above is that those funds can be rolled over into a Solo 401(k). If so:
(1) Will the rollover retain the tax attributes associated with the ROTH funds, regardless of the amount of those funds (which could be substantial)?
(2) Would you recommend doing this, or would you recommend rolling over the funds into a Self-Directed IRA instead? If you would recommend a rollover into a Solo 401(k), is there any particular reason it would be beneficial for IRA funds? Would you recommend it even if the individual did not expect to have any self-employment income in the near future?
Jeff,
I have a traditional IRA brokerage account with Etrade. I want to transfer some or all of the money into a self directed checkbook control LLC IRA. If I do this can I use this money to buy IRA approved gold and silver bullion and retain physical possesion? (as in buried under my house for example) If this is allowed, how difficult and expensive is it to set up this type of IRA?
Craig
Hi. Interesting information.
Can a Checkbook IRA fund an offshore corporation or offshore LLC that would own a portfolio of websites?
And could I be paid a salary as webmaster while the rest of the profit goes back into the offshore company?
A participant’s spouse can also contribute another $49,000 as well. Solo 401(k) plans are exempt from UBIT taxes related to debt leveraged real estate income and gain
Jeff,
I have a 401k with 255k. I’m considering forming a c-corp, and funding it with my 401k. I have my broker’s license and want to buy distressed properties and rent them for cash flow, draw a small salary from the C-corp, fund another 401k.
I would like to leverage the real estate over time and or flip some of the properties when the market recovers for other investments. I will add my future real estate commissions and property management activities ito the c-corp’s revenue stream and deduct as many expenses as possible to keep the c-corp from producing profits.
What are the tax pitfalls to this strategy?
Hi Jeff,
I own a building lot – formerly my primary residence and I want to transfer funds from my 401K to a self directed IRA to build a new home on the property that I own to sell upon completion or possibly rent.
I plan to have the property appraised before I build and then have the land & property appraised again after construction is complete to identify my personal and IRA ownership shares and then gain/loss upon sale.
Is it possible to substitute appraisals for absence of arms length transactions to avoid prohibited transaction, self dealing restrictions? I have no intentions (zero!) to use the new home personally after construction. IRA funds cannot ever be used to develop property that is or ever was owned by the principal? Just looking for an above board solution, don’t want to try anything dodgy like a sham or back and forth transaction for the property. Thanks John
Jeff,
I own two rental properties (leased for 3 years) with small mortgages on each. Is there any process, that the IRS will allow, for me to pay off these mortgages with IRA funds?
I plan to hold these properties long term.
Mark
Jeff,
Great informative site here. I have a self directed IRA with Entrust Retirement Services in Houston, Tx. I have a business proposal from an experienced realtor here, we want to flip houses together.
***He will secure a loan for the initial purchase of a house.
***I will fund the rehab from my IRA to his LLC.
***We then sell the house.
***We will split the profits 50 / 50.
I need to know what I need to do on my part to make this happen…form my own llc (in or out of the IRA), partnership with him, etc; Also, would it be possible to take a salary from his llc in any way shape or form (or from my profits) or would that be prohibited? My plan would be to take a 10% salary from my profits if possible.
eg: my profit= $15,000 for a salary of $1,500
Jeff,
is it true that once you fund the IRA LLC you cannot put any new funds into the LLC?