Frequently Asked Questions

What are the prohibited transactions that cannot be engaged in when operating an IRA LLC?

Operating an Individual Retirement Account Limited Liability Company (IRA LLC) comes with certain restrictions to ensure the integrity of the retirement account. These restrictions, known as prohibited transactions, are designed to prevent self-dealing or conflicts of interest that could jeopardize the tax-advantaged status of the IRA. Firstly, the IRA LLC cannot pay money to the IRA owner or any member of the owner's family. This rule is in place to prevent the IRA owner from using the LLC as a personal bank account, which would violate the purpose of the IRA as a retirement savings vehicle. Secondly, the IRA LLC cannot distribute or sell property to the owner or any member of the owner's family. This means that the business cannot give away property or sell it to the owner or family. This rule is designed to prevent the IRA owner from personally benefiting from the assets held within the IRA LLC. Thirdly, the IRA LLC cannot allow the owner or any family member to use property that belongs to the IRA LLC. For example, they cannot live at the investment property that is owned by the business. This rule is in place to prevent the IRA owner from using the IRA LLC's assets for personal use.