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What is a Checkbook IRA or Checkbook Control?

"Checkbook Control" is a term used when a self-directed IRA owner has complete signing authority over his/her retirement funds. This type of control offers greater investment freedom, allowing you to manage your assets with ease. Checkbook control is not a requirement to invest with your IRA, but the freedom allowed by this strategy can be a significant benefit in helping investors meet their savings goals.

How Does it Work?

In order to obtain “checkbook control,” you must first establish an LLC that is owned by your IRA. Once you establish this new LLC, a business checking account will be set up in its name (this requires a tax ID number (EIN), as well as a copy of your Articles of Incorporation). The business checking account will be linked to your self-directed IRA funds, and you will be given a checkbook that is directly linked to that account. By electing yourself “Managing Member” of the LLC, you will then be in control of that checkbook, therefore gaining “checkbook control” over your self-directed IRA funds.  

The Entrust Group does not sell or create LLCs. To learn about the specific requirements of forming an LLC, visit the IRS website or your local SBA district office for more information.

Using an LLC in your Self-Directed IRA

Your IRA LLC is a legal entity that can purchase assets outright, allowing you the freedom to direct your retirement funds.  When you use an LLC in your IRA, you have direct access to your IRA funds, which makes this a popular strategy among real estate investors, who often need quick access to cash for maintenance and repairs.

Some Advantages of Using an LLC in Your Investment Strategy May Include:

Easier Control of Your Investments

When you identify an investment that you want to purchase, you can just write a check or wire the funds. You don’t have to fill out paperwork, rely on your administrator to fund a purchase, or wait for someone else to write a check—you can take care of it yourself. This can be particularly helpful with investments that have time restraints, such as auctioned items.

Administrative Costs

Checkbook control has the ability to help you avoid the administrative and transaction fees that are typically associated with a self-directed IRA. If you own multiple investments in your LLC, your administrator only charges you for one asset, the LLC. Administrative fees may vary, depending on your investment type. 

Due Diligence

With these advantages, however, come additional risks. Before you decide to register your business entity as an LLC, take the time to do your due diligence and learn about potential drawbacks or costs you may be responsible for. These can include items such as tax requirements, member limitations, and registration availability within your individual state.

Corporate formation and ongoing record-keeping requirements for LLCs vary by state. Visit your state’s government website for more information on specific requirements.

You can also contact an Entrust representative at any time if you have questions or concerns regarding your investment options.

For more information about LLCs, visit our Learning Center.

Disclaimer: The Entrust Group does not offer investment, tax, financial or legal advice to clients. Individuals who believe they need advice should consult with the appropriate professional(s) licensed in that area.