Know What is Checkbook Control in an SDIRA and Its Advantages

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‘Checkbook Control’ is an important term connected to a Self-Directed Individual Retirement Account(SDIRA). It refers to the condition when the account holder has the complete signing authority over the SDIRA.

The account holder can achieve the privilege through establishing an SDIRA LLC.

How to Get Checkbook Control and How Does it Work?

To get Checkbook control, you need first to establish an LLC, in which your IRA can fund or invest. In other words, your SDIRA is the investor of the LLC and not you as a person.

Once you establish the new LLC, the General Manager of the LLC needs to set up a business checking account of the LLC. Subsequently, you, the SDIRA holder, will get the control of that Checkbook, thus gaining ‘Checkbook Control’ over your SDIRA.

The Advantages

The ‘Checkbook Control’ feature offers a slew of advantages, such as:

Easier Control

It gives you easier control of your investments. After you identify an investment that you want to purchase, you can write a check or wire the funds. There is no need for you to fill out any paperwork or wait for someone to write a check. You have the freedom to do all that by yourself.

Administrative Costs

You can escape the administrative and transaction fees that are associated with an SDIRA with a ‘Checkbook Control’.

Doing Due Diligence is a Must

Despite these advantages, you cannot escape doing due diligence as there are some risks associated with the setting up of an LLC. You need to do due diligence to know about the potential drawbacks or costs before you decide to register your business entity as an LLC.

You need to know aspects such as tax requirements, annual state-required fees, member limitations, and registration availability within your individual state.

You can use your SDIRA to diversify your retirement funds by investing in alternative assets, like precious metals. Refer to the infographic in this post to know more.