SELF-DIRECTED IRA/401k LLC OPERATION AGREEMENT
In general, a self-directed IRA or 401K LLC Operating Agreement should include special tax provisions relating to “Investment Retirement Accounts” and “Prohibited Transactions” pursuant to Internal Revenue Code Sections 408 and 4975. In addition, since the LLC must be managed by a manager and not the member, the Operating Agreement would need to include special management provisions. For the remainder of this paper, I will refer to an IRA and 401you’re your “IRA” or “tax-deferred fund.”
Some important things to remember:
- You are the IRA owner.
- Your IRA will own 100% of the LLC.
- You do NOT own the LLC.
These things may seem self-evident, but it is easy to get confused about these issues and confusion leads to mistakes. The entire tax benefit depends on these facts.
Now, please remember the following:
For single member LLCs, such as your tax deferred plan, the Operating Agreement is of little practical use. It is only an agreement with yourself, which means you can change it at any time for any or no reason. In fact, in Wyoming, you are not required to have one. The bottom line is: “It is not what you say, but what you do, that is important.”
For example: You could include a line item in your Operating Agreement that states you will not engage in any “prohibited transactions”; however, if you are found to have dealings with a disqualified individual, you will still be in trouble, regardless of what you wrote in the Operating Agreement. In fact, it may even go worse for you because the Operating Agreement will demonstrate that you were aware of the infraction beforehand.