Vantage Retirement Plans, LLC

How Vantage Works:  See Vantage’s How We Work web page

Websitewww.vantageiras.com

Contact:  Bobbielynn Berry, CISP – Business Development
Email:  BBerry@VantageIRAs.com

Hours:  Weekdays:  9:00 AM – 5:00 PM (Arizona time)

Phone:  (480) 306-8404
Phone
:  (866) 459-4580
Fax
:  (480) 306-8408

Email:  info@vantageiras.com

Mailing Address & Home Office:

Vantage Retirement Plans, LLC
20860 N. Tatum Blvd., Suite 240
Phoenix, AZ 85050

CaveatNeither KEYTLaw, LLC, nor Richard Keyt recommends the above company to act as a custodian of any IRA account.  The above company is listed on this IRA LLC Law website because Richard Keyt has formed at least one IRA LLC in which a member has been the above company as the custodian of an IRA.

Vantage Retirement Plans, LLC 2015-10-14T09:32:50+00:00

IRA Services Trust Company

About: See IRA Service’s about web page.

Hours:  Weekdays:  9:00 AM – 5:00 PM (Pacific Time)

Phone:  (650) 593-2221
Fax
:  (650) 591-2168

Websitewww.iraservices.com

Email:  customerservice@iraservices.com

Mailing Address:

IRA Services
P.O. Box 7080
San Carlos, CA 94070-7080

Home Office:

IRA Services Trust Company
401 E 8th St. Suite 200L
Sioux Falls, SD 57103-7015

If you will be investing in a private or single member LLC, you need to read and complete the following documents:

CaveatNeither KEYTLaw, LLC, nor Richard Keyt recommends the above company to act as a custodian of any IRA account.  The above company is listed on this IRA LLC Law website because Richard Keyt has formed at least one IRA LLC in which a member has been the above company as the custodian of an IRA.

IRA Services Trust Company 2018-05-13T13:58:52+00:00

Prohibited Transaction Consequences

Question:  What are the consequences of participating in a prohibited transaction?

A disqualified person who takes part in a prohibited transaction must correct the transaction and must pay an excise tax based on the amount involved in the transaction. The initial tax on a prohibited transaction is 15% of the amount involved for each year (or part of a year) in the taxable period. If the transaction is not corrected within the taxable period, an additional tax of 100% of the amount involved is imposed. Both taxes are payable by any disqualified person who participated in the transaction (other than a fiduciary acting only as such). If more than one person takes part in the transaction, each person can be jointly and severally liable for the entire tax.

The amount involved in a prohibited transaction is the greater of the following amounts:

  • the money and fair market value of any property given; and
  • the money and fair market value of any property received.

If services are performed, the amount involved is any excess compensation given or received.

The taxable period starts on the transaction date and ends on the earliest of the following days:

  • the day the IRS mails a notice of deficiency for the tax;
  • the day the IRS assesses the tax; and
  • the day the correction of the transaction is completed.

The tax is paid with Form 5330.

For additional information, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans).

Prohibited Transaction Consequences 2018-05-13T13:58:52+00:00

The Entrust Group

Websitewww.theentrustgroup.com/

Hours:  Weekdays:  9:00 AM – 5:00 PM (Pacific time)

Phone:  (800) 392-9653
Fax:  (866) 815-5168

Contact:  Ryan Rippy,  Business Development Manager
Phone
:  949-420-4524
Email
:   rrippy@theentrustgroup.com
27201 Puerta Real, Suite 300
Mission Viejo, CA 92691

Mailing Address & Home Office:

The Entrust Group
Irvine Center Drive, Suite 800
Irvine, CA 92618

CaveatNeither KEYTLaw, LLC, nor Richard Keyt recommends the above company to act as a custodian of any IRA account.  The above company is listed on this IRA LLC Law website because Richard Keyt has formed at least one IRA LLC in which a member has been the above company as the custodian of an IRA.

The Entrust Group 2015-10-14T09:32:14+00:00

IRA Owners’ Guaranties of Corporate Debt Were Prohibited Transactions

In May of 2013, the U.S. Tax Court ruled that two IRAs engaged in prohibited transactions under Internal Revenue Code Section 4975(c)(1)(B) and were disqualified because the IRA owners guaranteed a debt of a corporation owned by the two IRAs.  See Peek vs. Commissioner, 140 T.C. No. 12, (2013).  Why did the IRA owners guaranty the debt of the corporation owned by their IRAs?  The rule against IRA owners guarantying loans to the LLC or corporation owned by the IRA is well know, at least among advisers who understand IRA LLCs.

The taxpayers in Peek apparently did everything wrong that they possibly could have done.  Even if the IRA owners had not guaranteed the corporation’s debt the IRS could have disqualified the two IRAs for several other prohibited transactions.  The Tax Court said:

“Because we hold that the loan guaranties were prohibited transactions, we need not and do not reach the additional questions of whether prohibited transactions occurred (i) when FP Company made payments of wages to Mr. Fleck and Mr. Peek (which the IRS contends were prohibited transactions under section4975(c)(1)(D)), or (ii) when FP Company made payments of rent to an entity owned by Mrs. Fleck and Mrs. Peek (which the IRS contends were prohibited transactions under section 4975(c)(1)(E)).”

IRA Owners’ Guaranties of Corporate Debt Were Prohibited Transactions 2017-09-10T15:27:36+00:00

Information About Forming & Operating Self-directed IRA Limited Liability Companies

If you want to learn about legal issues related to forming and operating a limited liability company that has one or more members that is an IRA or a retirement plan, this is the place.  My name is Richard Keyt.  I am an Arizona limited liability company attorney who has formed 

5,900+ Arizona LLCs, including many LLCs that have an IRA or retirement plan as a member.

Throughout this IRA LLC Law website, the term “IRA LLC” means a limited liability company formed under the laws of any state in the United States of which one or more members is a a traditional IRA, a Roth IRA, a 401(k), a profit sharing plan, a money purchase pension plan, a defined benefit pension plan or certain other ERISA retirement plans allowed to make self-directed investments.

I created this IRA LLC Law blog because:

  1. I want to inform and educate people who are considering making a self-directed investment through an LLC about the important legal issues that arise whenever they use IRA or retirement funds to buy assets or own and operate a business through a limited liability company.
  2. Nobody should make self-directed investments through an IRA LLC without first doing their homework and this IRA LLC Law website’s purpose is to help people do their homework.
  3. I want to correct a lot of of misinformation written on the internet about IRA LLCs, self-directed IRA investments and prohibited transactions.
  4. The consequences of not knowing and following the law can be economic disaster if the IRS disqualifies the IRA or retirement account because the result is the entire value of the IRA or disqualified account is included in the income of the IRA owner or retirement account participant in the year of the disqualification.

I invite you to bookmark this site and invest time reading the information presented here before you jump out of the frying pan of traditional investments and into the fire of nontraditional investments by making self-directed investment in an IRA LLC.

Information About Forming & Operating Self-directed IRA Limited Liability Companies 2018-05-13T13:58:52+00:00

How to Invest Self Directed IRA Funds in a Limited Liability Company & Make Nontraditional Investments

Question 1:  Can I form a limited liability company in which my IRA is a member and use all or a portion of my IRA funds to make self directed investments through the LLC in various assets, including, but not limited to, real estate?

Answer:  Yes, but there are some types of assets that cannot be acquired.

Question 2:  Does it take a ton of money and a rocket scientist to form an LLC owned by an IRA (“IRA LLC”)?

Answer:  No:  I form Arizona IRA LLCs for $997.  I’m not a rocket scientist, but I am an Arizona LLC and business attorney who has a masters degree in income tax law from New York University School of Law.  I understand how to form IRA LLCs and have formed 

5,900+ LLCs, including many IRA LLCs.  See our  five star reviews.

Why I Form IRA LLCs

Because I have formed 5,900+ limited liability companies, people frequently contact me and ask if I can create an Arizona LLC owned by one or more IRAs.  The answer is yes.  For the purpose of this article, when I use the term “IRA” it also includes Roth IRAs, 401(k) plans and traditional retirement plans such as money purchase pension plans and defined benefit pension plans.  I have formed many LLCs that have one or more IRAs as a member (aka owner).

In 2005 I attended a three hour seminar presented by the Personal Real Estate Investor Magazine at which nationally known “real estate guru” explained how self-directed IRA funds could be used to invest in real estate purchased through an LLC.  One of the speakers was an attorney not licensed in Arizona who created IRA LLCs for a “mere” $4,000.”  Since I was only charging $599 to form an Arizona LLC I was shocked to hear that the out of state attorney was able to charge so much.  I asked him what he did to justify $4,000 for an IRA LLC.  When he was unable to justify such a high price, I decided that I would research the law concerning IRAs, LLCs and self-directed investments so that I could create high-quality IRA LLCs for a lot less than $4,000.

Why Form an IRA LLC?

There are several reasons to make self directed investments through an IRA LLC.

  1. To Purchase Non-traditional Assets – The primary reason people form IRA LLCs is to use their IRA funds to make self directed investments in “non-traditional” assets selected by the IRA owner.  Most IRA custodians limit the types of assets in which the IRA can invest to stocks, bonds, mutual funds, annuities, CDs and similar “traditional” investments.  Traditional investments are numerous, but consist of only a fraction of the possible assets that people desire to purchase and hold for investment.
  2. Checkbook control” – The IRA owner can be the manager of a manager managed IRA LLC, but the IRA owner cannot be compensated for services or use his or her funds to pay any of the IRA LLC’s expenses.
  3. Asset Protection for the IRA Owner – The general rule of Arizona law is that the manager of an Arizona LLC is not liable for the debts or obligations of the LLC.
  4. Asset Protection for Non-IRA Owners – The general rule of Arizona law is that the members (owners) of an Arizona LLC are not liable for the debts or obligations of the LLC.  This is an especially important factor when the IRA LLC has members who are not IRAs.
  5. To Pool Assets with Other Investors – When the cost to acquire an asset exceeds the funds available to a single investor, multiple investors may pool their funds to purchase the asset.  The best way for multiple investors to pool assets is through an IRA limited liability company.  The IRA and other investors contribute money to the IRA LLC that uses the funds to purchase the asset.  An IRA LLC can have multiple members including more than one IRA, people and entities as long as the prohibited transaction rules are not violated.
  6. To Create an Organizational & Management Structure When There are Multiple Members – Whenever there are multiple owners of a valuable asset, they need a set of rules and policies that will govern their common investment.  The IRA LLC provides the governing structure, rules and policies applicable to how the joint owners will operate the company and deal with its assets.  When you are a co-investor with others in a valuable asset, you should never rely on oral statements or agreements.  You must have a written document that governs your arrangement.  The Operating Agreement signed by all of the members is the foundational governing document.
  7. When the Asset is “Complex” – If the asset to be purchased is “complex” then an IRA LLC is needed.  For example, if you want to use self-directed IRA funds to purchase a ten unit apartment complex, you should form an IRA LLC to own and operate the apartments.  Neither you nor your IRA custodian will want the IRA custodian to be involved in the day to day operations of the business such as paying utilities, depositing rent checks, signing leases, evicting tenants or any of the other common management tasks that arise from owning an apartment complex.

What Assets Cannot Be Purchased by an IRA?

Self directed IRA LLCs may purchase virtually any type of asset (tangible and intangible), except an IRA LLC may not purchase any of the following three types of assets:

  1. Life insurance contracts such as a policy of life insurance policy on the life of the owner of the IRA;
  2. Stock in an entity taxed under subchapter S of the Internal Revenue Code.  This includes membership interests in an LLC taxed as a S corporation; and
  3. Items classified as a collectible such as cars, furniture, stamps and antique rugs.

If an IRA purchased a prohibited asset, the IRS could disqualify the IRA, which would cause the IRA owner to have taxable income in the year of the purchase plus be subject to penalties.

Real estate is probably the asset most people purchase with self directed IRA funds.  IRA funds can be used to purchase residential homes, condos, duplexes, tri-plexes, four-plexes, multi-tenant housing projects, raw land, commercial land of all types (office buildings, mini-storage units, shopping centers, industrial property, etc.) mobile home parks and other types of real estate.

What are the Consequences if an IRA LLC Engages in a Prohibited Transaction?

An IRA LLC must never engage in a transaction that is a prohibited transaction as defined in the Internal Revenue Code.  If the IRA LLC ever engages in a prohibited transaction the IRA will be disqualified and all of the assets in the IRA account will be deemed to have been distributed to the IRA owner in the year of the disqualification and if the IRA is a traditional IRA (not a Roth IRA) the full  fair market value of the assets are included in the taxable income of the IRA owner for the year of the disqualification.

What are the Prohibited Transaction Rules?

Every IRA must be aware of and take care not to violate the prohibited transaction rules.  The Internal Revenue Code and the Department of Labor have rules and regulations commonly called the “prohibited transaction rules” that if violated by an IRA LLC will disqualify the the IRA, which results in taxes and penalties in the year of the prohibited transaction.

The prohibited transactions are set forth in Internal Revenue Code Section 4975(c)(1), which states that a “prohibited transaction” includes any direct or indirect-

  • sale or exchange, or leasing, of any property between a plan and a disqualified person;
  • lending of money or other extension of credit between a plan and a disqualified person;
  • furnishing of goods, services, or facilities between a plan and a disqualified person;
  • transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan;
  • act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a plan in his own interest or for his own account; or
  • receipt of any consideration for his own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan.

Section 4975(c)(1) prohibits transactions between the IRA and a disqualified person.  Transactions between an IRA and a person or entity that is not a disqualified person are not prohibited by Section 4975(c)(1).

Who are Disqualified Persons?

Internal Revenue Code Section 4975(e)(2) states “the term ‘disqualified person‘ means a person who is—

(A) a fiduciary;
(B) a person providing services to the plan;
(C) an employer any of whose employees are covered by the plan;
(D) an employee organization any of whose members are covered by the plan;
(E) an owner, direct or indirect, of 50 percent or more of—

(i) the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of a corporation,
(ii) the capital interest or the profits interest of a partnership, or
(iii) the beneficial interest of a trust or  unincorporated enterprise, which is an employer or an employee organization described in subparagraph (C) or (D);

(F) a member of the family [Definition of family member:  “the family of any individual shall include his spouse, ancestor, lineal descendant, and any spouse of a lineal descendant.”] of any individual described in subparagraph (A), (B), (C), or (E);
(G) a corporation, partnership, or trust or estate of which (or in which) 50 percent or more of—

(i) the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of such corporation,
(ii) the capital interest or profits interest of such partnership, or
(iii) the beneficial interest of such trust or estate,

is owned directly or indirectly, or held by persons described in subparagraph (A), (B), (C), (D), or (E);

(H) an officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10 percent or more shareholder, or a highly compensated employee (earning 10 percent or more of the yearly wages of an employer) of a person described in subparagraph (C), (D), (E), or (G); or
(I) a 10 percent or more (in capital or profits) partner or joint venturer of a person described in subparagraph (C), (D), (E), or (G).

The above definitions also make a disqualified person any entity in which equity interests of fifty percent or more are owned by the IRA owner or a member of the IRA owner’s family.  The definition of family member in Section 4975(e)(6) does not include does not include sisters, brothers, uncles, aunts, or any other non-lineal descendant.

General Rules to Avoid Having Your IRA LLC Engage in a Prohibited Transaction

The prohibited transaction rules can be very complex, but here are some simple rules of thumb all IRA LLCs should follow to avoid engaging in a prohibited transaction:

  1. The IRA LLC should never pay money to the IRA owner or any member of the IRA owner’s family, including a spouse of a lineal descendant.
  2. The IRA LLC should never distribute/give property to the IRA owner or any member of the IRA owner’s family, including a spouse of a lineal descendant.
  3. The IRA LLC should never allow the IRA owner or any member of the IRA owner’s family, including a spouse of a lineal descendant, to use any property that belongs to or is leased or possessed by the IRA LLC.  For example, if the IRA LLC owns a home, neither the IRA owner, nor the IRA owner’s spouse, parents, children or grandchildren can ever (NOT EVEN ONE DAY) stay in the home.  If the IRA LLC owns a riding lawn mower, the IRA owner cannot borrow the lawn mower to mow the IRA owner’s home lawn.  If the IRA LLC owns an airplane hanger, the IRA owner may not store the IRA owner’s airplane in the hanger for a night.  If the IRA LLC owns land, the IRA owner may not take a group of people to the land for a picnic.
  4. The IRA owner and all members of the IRA owner’s family, including a spouse of a lineal descendant, may not provide substantial services, including uncompensated services, to or for the benefit of the IRA LLC.  If the IRA LLC owns a rental home that needs the interior painted at a reasonable cost of $2,000, the IRA owner may not paint the interior of the home to save the $2,000 that would otherwise be paid to a painter.  This is considered a disguised contribution of money by the IRA owner to the IRA LLC.  If the IRA LLC had paid the painter the $2,000, the net value of the IRA LLC would have decreased by $2,000.  The IRS would say that the IRA owner’s painting is the equivalent of the IRA LLC paying a third party $2,000 for the paint job and then having the IRA owner contribute $2,000 of the IRA owner’s funds to the IRA LLC with the result that the IRA LLC’s net value is unchanged.
  5. The IRA owner and all members of the IRA owner’s family, including a spouse of a lineal descendant, may not pay any expenses or the IRA LLC, including the cost to form the IRA LLC.  We will not accept payment of an IRA LLC in advance of forming the LLC.  We require payment after we form the IRA LLC and the IRA account funds the IRA LLC’s bank account.  When the IRA owner pays expenses of the IRA LLC, it is a disguised contribution to the IRA just like in the preceding rule.
  6. The IRA owner and all members of the IRA owner’s family, including a spouse of a lineal descendant, may not engage with the IRA LLC in any transaction that is a sale, purchase or lease of property.  The IRA LLC cannot purchase the IRA owner’s real property or a home owned by the IRA owner’s child.
  7. The IRA LLC may not use any property owned by the IRA owner or any member of the IRA owner’s family, including a spouse of a lineal descendant, as collateral for a loan.
  8. The IRA LLC may not engage in any of the above transactions with a fiduciary, a person who provides services to the IRA or an entity of which the IRA owner owns 50% or more.

To summarize, the IRA owner and all members of the IRA owner’s family must never engage in any activity with the IRA LLC.  There are many other situations in which an IRA LLC may engage that can be prohibited transactions.  The above list is not all-inclusive.  An IRA LLC should take any action that is not clearly an authorized transaction without first consulting with an experienced prohibited transaction advisor.

How to Hire IRA LLC Attorney Richard Keyt to Form an IRA LLC for $997

It is very easy to hire me to form your IRA LLC.  Just follow the six simple steps in my article called ” How to Hire Richard Keyt to Form an IRA LLC.”

How to Invest Self Directed IRA Funds in a Limited Liability Company & Make Nontraditional Investments 2018-05-13T13:58:52+00:00

How to Hire Richard Keyt to Form an IRA LLC

In forming 5,900+ Arizona limited liability companies, including many that have a member that is an IRA or retirement plan, IRA LLC attorney Richard Keyt has learned how to make the IRA LLC formation process very easy.  Here’s the 6 easy steps the IRA owner must accomplish to hire Richard to form an IRA LLC for $997 and get check book control over the IRA’s funds:

Step 1Research:  Spend some time on this website and learn about IRA LLCs.

Step 2Get Answers to Your Questions:  Contact me (480-664-7478 or rickkeyt@keytlaw.com) if you have any questions about forming or operating an IRA LLC.  I don’t charge to answer questions about IRA LLCs.

Step 3Get a Custodian that Allows Directed-Investments:  If you cannot make self-directed investments where your funds are currently located, you must open an account with a custodian that will allow for the self-directed investments.  See “Custodians” that my clients have used for their IRA LLCs.  All of these custodians allow for self-directed investments, including investments through an IRA LLC.  When you open the account the custodian will give you the account’s name and its account number.  I need this information to form the LLC because it will be owned by the custodian for the benefit of the IRA.

Step 4.  Transfer Funds to New Custodian:  Arrange for a direct custodian (old) to custodian (new) transfer of the funds you want in the new custodian’s IRA account.

Step 5Complete Our Formation Questionnaire:  Go to our IRA LLC formation questionnaire and give us the information we need to form the IRA LLC.  When you click on the submit button we will send you an email message with the questions and answers you submit in your Formation Questionnaire.

Step 6Cause the Custodian to Pay Our Fee by Sending Our Invoice to the Custodian:  The IRA owner must do the following two things to pay our fee:

A.  Prepare a KEYTLaw, LLC, invoice and send it to the custodian.  Go to our online do-it-yourself invoice. Enter your information then click on the submit button to and we will email an invoice to you that you can give to your custodian.

B.  Get a copy of the custodian’s disbursement request form (see the custodian’s website).  Complete the disbursement request form and send it to the custodian along with our invoice you generated in the prior step.

FYI:  You can be working on steps 4, 5 and 6 as soon as you have an account with a custodian that will allow self-directed funds.

When Will Your IRA LLC Be Formed?

We will form your IRA LLC on the first Friday after we receive your completed IRA LLC Formation Questionnaire and our fee.

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How to Hire Richard Keyt to Form an IRA LLC 2018-05-14T07:21:05+00:00

Can I Form an Arizona IRA LLC & Do Business or Own Real Estate in Another State?

Question:  Neither I nor my IRA custodian is a resident of or is located in Arizona.  Can I form an IRA LLC in Arizona that will own and operate a business or own real estate in another state?  If so, are there additional costs?

Answer:  Yes.  An entity (LLC, corporation or limited partnership) formed in one state can register to do business in any other state in the United States.  Doing business includes owning real estate in a state other than the state in which the entity was formed.  For example, if you are a resident of New York, your custodian is located in Ohio and your IRA LLC will own real estate in California, your IRA could form an Arizona limited liability company and then register it to do business in California.  If hired, we will prepare the papers for an additional $200 (plus state filing fees) for each foreign state and file it with any state in which your IRA LLC will own real estate or own and operate a business.

To register an Arizona LLC to do business in California involves preparing and filing a registration form an paying a $70 filing fee.  It’s a relatively simple procedure.  The problem, however, with doing business in money-starved California is that it has an annual $800 minimum gross receipts tax on LLCs, regardless of where the LLC is formed.  An entity formed outside California that does business in California is subject to a $100/day fine for failing to register to do business in the state.

Possible Additional Costs for an Arizona LLC that Does Business in Another State

If your IRA forms an Arizona IRA LLC and then qualifies to do business in another state, the IRA LLC probably will be required by the other state to pay an annual fee and file an annual report.  Unlike Arizona, which does not require Arizona LLC’s to file an annual report or pay an annual fee after it is formed, most states do impose an annual fee tax on companies formed in the state and companies formed outside the state that do business in the state.  Bottom line is that even if your IRA LLC were to be formed in the state in which it will do business, it would still be subject to the annual fee and report requirements of the state.

Can I Form an Arizona IRA LLC & Do Business or Own Real Estate in Another State? 2017-09-10T15:14:29+00:00

Are self-directed IRAs too good to be true?

USA Today:  “A self-directed IRA allows you to invest in things other than securities registered with state or federal authorities. For example, you can use the assets in a self-directed IRA to buy a rental property, or even as the down payment for a mortgage on a rental property.  There are restrictions, however, on self-dealing: You can’t rent the place to yourself, for example. And you must have a qualified third-party custodian for the IRA.  Self-dealing restrictions on investing in small businesses — especially sole proprietorships — are also complex, and you should see a tax lawyer before you put IRA money into a small business. ‘Self-directed IRAs have helped fund thousands of small businesses that otherwise wouldn’t be there, says Tom Anderson, president of the Retirement Industry Trust Association, a trade group.”

Are self-directed IRAs too good to be true? 2017-09-10T16:32:19+00:00