What legal issues are particular to IRAs investing in an LLC?
Some legal issues that are particular to IRAs have to be known and understood by the LLC investor and/or their professional advisors. An IRA cannot invest in an LLC in which the IRA owner and/or any other “disqualified persons” already own 50% or more of. Disqualified persons include the IRA owner, the spouse of the IRA owner, the IRA owner’s descendants, ascendants and spouses of descendants. For example, if you and your wife and kids have an existing LLC in which you are the only owners (e.g., 100% ownership by disqualified persons), then your IRA cannot invest in that LLC. You could, however, create a new LLC and have both your IRA and the existing LLC invest into it as founding members at the same time. A notice issued by the IRS in early 2004 called “2004-8”, sets out guidelines related to avoiding a penalty associated with a prohibited transaction involving a Roth IRA. However, many attorneys will advise that similar triggering transactions involving traditional IRAs be avoided a
