"Special" LLC Required For Roth IRA? - Posted by Hugh Gaugler

Posted by Hugh Gaugler on April 01, 2006 at 14:24:22:

Thanks John. I suspected that the “special” designation was really nothing but a “sales hook”. And I do understand about the self-dealing no-no.

I’m curious about one more thing. If an Roth IRA does own a business, such as 100% of an LLC for example, and given that the business is operated totally by the books (no self-dealing, etc.), would the profits really not be subject to any tax?

On the other hand, if the profits of IRA owned business are subject to tax, then what’s the point of having one?

Thanks again,

---- Hugh

“Special” LLC Required For Roth IRA? - Posted by Hugh Gaugler

Posted by Hugh Gaugler on March 30, 2006 at 20:05:40:

A certain website claims the following regarding setting up an LLC to be owned by a Roth IRA:

“Please note that an IRA owned LLC is very different than a regular LLC. One of the lessons learned from the Swanson case was the LLC must contain very specific language that meets all IRA codes and requirements, and that satisfies the Department of Labor (DOL) and all
rules must be strictly followed. If the LLC is improperly drafted, the entire LLC IRA may be disqualified and taxed.”

Is this true? Or is it only a scare tactic intended to get the reader to purchase an LLC for their IRA only through this website?

Being wary of sales slants on information, my gut tells me that the above statement is partially true, and that an LLC for an IRA, like ANY LLC, must be set up properly . . . but other than that is probably no more “special” than any other LLC.

So, are there any special rules or special language required to set up an LLC for a Roth IRA? (And if so, where can I get this information?)


---- Hugh

IMHO, no “special” LLC needed - Posted by John Merchant

Posted by John Merchant on April 01, 2006 at 13:58:48:

In my opinion no "special " LLC is required.

I’ve read the Swanson decision a number of times, and it certainly said or inferred no such thing…in fact the entity in Swanson was a C Corp and NO LLC was even involved.

The main thing, and the biggie, is that if you do use an LLC, you meticulously keep those funds well away from your personal funds and make absolutely sure you treat the LLC as a separate being so you’re never accused of “self dealing” which is verboten.

You’d want your LLC’s operating agreement to carefully spell out how-to’s in the SDIRA owned LLC and then you’d want to carefully comply with same.