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How to Invest in an LLC/Checkbook IRA

In order to initiate your investment, you will need to ensure you have sufficient cash in the account. If at the time of a purchase you don’t have sufficient cash in the account, consider a transfer-in, Rollover, Liquidation or contribution to fund the account before your purchase.

Investment Timeline Overview

STEP 1: Fund Your Account - Timeframe: 1 to 4 weeks  

  • Prepare your self-directed account by funding via contribution, transfer, or rollover. 

STEP 2: Set Up the LLC - Timeframe: Varies

  • You or the manager of the LLC will need to create the entity and set up documents.

STEP 3: Assemble Documents - Timeframe: 1 to 3 business days

  • Once you have all of the required documents prepared, you'll need to upload them.

STEP 4: Investment Funding - Timeframe: ~3 business days

  • Timeframe may vary.

STEP 5: Manage Your Account 

  • Once your investment is complete, you'll be able to manage the investment via the online portal.

 

Getting Started

Creating the LLC 

The LLC manager will be tasked with the creation of the entity and filing all the necessary documentation with the entity. It is highly recommended that you consult a competent attorney or tax professional that is familiar with retirement accounts, tax law and IRS rules to create the entity documents, although this is not a requirement. New Direction Trust Company does not create or provide examples of entity documents.  

Required Paperwork 

  • Closely Held Entity Acknowledgement – confirms acknowledgement of high-risk investment nature of closely held entities in regards to sections 4975, 408, 408A, and other relevant sections of the Internal Revenue Code (IRC) 
  • Operating Agreement – signed as “read and approved”   
  • Attorney’s Opinion Letter- If applicable, see below for more information 
  • Table of Membership – entity must reflect the proper titling of the IRA as the member or beneficiary, and list the IRA’s capital contribution and percentage of ownership  
  • Organizational Documents (from Secretary of State)  
  • Tax ID Number of Entity  

*In order to submit your Buy Direction Letter you will need to ensure you have sufficient cash in the account. If at the time of a purchase you don’t have sufficient cash in the account, consider a transfer-in, Rollover, Liquidation or contribution to fund the account before your purchase. If you are working with us already on a sale or funding request, check your account daily for incoming funds. As soon as funds clear in your account, you will be able to submit your purchase request.  

Titling/Signature Lines on Investment Documents 

The name in which the LLC is to be held is: NDTCO as custodian FBO Account Holder’s Name IRA  

The initial investment documents to establish the entity should reflect the name of the IRA: NDTCO as custodian FBO Account Holder’s Name IRA.  

Attorney Opinion Letter 

New Direction Trust Company requires an Attorney’s Opinion Letter be provided if you, the IRA holder, or another disqualified person will be appointed manager of the entity after the funding. The Attorney’s Opinion Letter must affirm that according to IRC Sec. 4975, the funding of this structure does not constitute a prohibited transaction. The Attorney’s Opinion Letter is created by a competent legal professional. Here is a list of attorneys that could help you set up a Checkbook IRA.   

Please follow the chart below to determine if an Attorney Opinion Letter is required to fund the investment:  

Appointing IRA Owner or other disqualified person as Manager* 

Description 

Attorney Opinion Letter Required 

Single member entity 

Yes 

Entity with 1 or more disqualified persons owning an aggregate 
share of 50% or more 

Yes 

Entity with IRA and IRA holder personally or other disqualified 
person(s) owning aggregate share of 50% or more 

Yes 

For Trust Agreements, the IRA holder may be appointed Trustee 
prior to funding 

Yes 

 

Appointing a Non-Disqualified Person as Manager 

Description 

Attorney Opinion Letter Required 

Single member entity 

No 

Entity with 1 or more disqualified persons owning an aggregate share of 50% or more 

No 

Entity with IRA and IRA holder personally or other disqualified person(s) owning aggregate share of 50% or more 

No 

For Trust Agreements, the IRA holder may be appointed Trustee prior to funding 

No 

All legal fees incurred for the registration/formation of the LLC must be paid from either your IRA account or by the LLC.

When setting up the LLC bank account, banks typically require an initial deposit on the day of account opening. The initial deposit will need to be either your IRA funds or funds from a non-disqualified person who can be reimbursed from the LLC at a later time. This is in relation to IRS code 4975 for prohibited transactions. Some banks may allow the account to be opened before an initial deposit is made based on your relationship with the bank and the expected day of funding. The day of funding is reliant on completing all necessary paperwork, sufficient funds, and fee payment.  

  • To pay expenses using the online portal Bill Pay (FREE), click here.   
    • You will be asked to log into the portal and then directed to the “Bill Pay” page. Please use the dropdown menu to select which asset you are paying a bill for and click “Pay Now.” You can then input all payment information into the online form. Simply hit submit, and you are done!    

The LLC must be able to conduct all its business with the cash available in the business accounts without involving disqualified persons or your personal funds.