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Self-directed IRA LLC

Discussion in 'Investments and Savings' started by eddie, Mar 19, 2017.

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How interested in setting up a self-directed IRA LLC (1-7)?

This poll will close on Apr 18, 2017 at 11:47 PM.
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  1. eddie

    eddie New Member

    Hello!

    I'm hoping to enlist help, either in navigating paperwork/bureaucracy and legalzoom.com/nolo.com;
    or, by employing an affordable person/company to structure a "Self-directed Roth IRA LLC"

    Specifically, I mean to set up an investment vehicle that can invest in assets besides stocks/bonds/mutual funds.

    WHY?!?

    Believe it, or not, I think a diversified portfolio includes a few elements other than the Vanguard ETFs, and for me that includes some percentage held in physical Gold and Bitcoin, but for others it could be Real Estate, or really anything besides collectibles. Hopefully, in doing this exercise we can also make this much more accessible to all savers here. It's neat, and you'd also get an EIN, which I presume can also mean some extra credit card bonuses.

    Here's what I know:

    At least one company will help fill out paperwork and establish such an LLC, but they cost about $1500:

    "No longer confined by a bias towards stocks, bonds, and mutual funds, it can invest in almost any asset.

    Theoretically this process could be performed without a facilitator. An individual investor could establish a new self directed IRA by a qualified custodian, and then open a LLC for the account. However, this path could potentially be dangerous for your retirement account.

    It’s very easy to fill out the requisite documents in ways which will not legally conform to self directed IRA regulations. This could result in a rejection of your application, or even an implosion of your IRA with all of the accompanying penalties. With Broad Financial’s platform, the documents are guaranteed to be accurate and hassle-free."

    https://www.broadfinancial.com/self-directed-ira/ira-llc/

    My particular angle on this is (legally) dodging capital gains, and creating a means to avoid triggering taxable events on the occasional buying/selling of cryptocoins. This is not likely a realm most of you care for, but I find it fun, and there is a lot of speculation and potential benefits from the technology. If the crazy valuation of bitcoin persists, it will pose an interesting exception to the tradeoff normally experienced by young investors between increased (pre-tax) savings compounded versus tax-free distributions. Here are some fun charts: http://coinmarketcap.com/

    Does anyone have experience setting up either a Self-directed IRA, or an LLC, or paying a company to do so???

    Thanks much,
    Ed
     
  2. Matt

    Matt Administrator Staff Member

    Hey @eddie

    Couple of things:

    I've got nothing against the idea of diversification, but conceptually I'd like to address some points:

    1. If the upside is that great, $1500 is cheap. That said, you might find that people are riding on the Bitcoin bandwagon and therefore offering a vanilla product (the Self Directed IRA aspect) as something special (The Bitcoin IRA). I think if you do a more generic search for Self Directeds you'll find cheaper options.
    2. The fear of capital gains - don't be afraid to make huge profits and pay capital gain taxes, that means you are winning.
    3. The idea that you want to shelter gains in a tax advantaged account by trading highly volatile investments. I've been through that line of thinking myself, and know where you are coming from. But my experience has been that if you are playing with riskier investments, the chances that they lose is also high. The problem with the IRA is that the account is limited by contribution caps, so if you deplete it, it's a gonna. Much better to put your boring Vanguard stuff in it to grow over time, and then take risks in taxable (see point 2 above).
     
  3. Josh F

    Josh F Level 2 Member Charity Forum Mod

    I gave up on Cryptocoin speculation and would consider myself fortunate that I basically broke-even. There were just too many wacky events to predict a reasonable rise/fall ratio of the currency. Great for people who got in early on BTC of course, but so many of those currencies just fizzled in the end. Good luck!
     
  4. Duffmankc

    Duffmankc Level 2 Member

    A little confused as to what you are looking for - are you looking to set up and manage this IRA yourself? Or are you looking to set up an LLC for an IRA to invest in? There are companies that provide self-directed IRAs online that you can find by googling. One this you should keep in mind, is that investing in a tax-exempt entity with a self-directed IRA may be subject to Unrelated Business Income Tax (UBIT). Assuming your LLC is a pass-through entity, it would be subject to UBIT as the IRS won't allow income to pass through completely untaxed as it would if earned by a tax-exempt entity and owned by an IRA.
    Code:
    https://www.trustetc.com/self-directed-ira/rules/ubit
    Code:
    https://www.realtymogul.com/resource-center/articles/self-directed-iras-and-ubit
     

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