Self Directed SEP IRA

3 Replies

Hi BP community. I've been reading about the pros & cons of self directed IRAs, and looking to see if anyone has a recommendation for an expert that is familiar with the differences between a company based SEP IRA self-directed and standard SDIRA, if there are any differences. My particular interest is knowing if an LLC is required for using the funds for non-debt investments. Thanks in advance!

@David Davidson

A self-directed IRA operates the same, whether the IRA itself is SEP, Traditional, Roth, Inherited, etc. Such plans are simply a different configuration to allow that underlying IRA to be invested differently, but all other characteristics of the IRA remain the same.

A LLC is not required with any IRA to make it self-directed. For investments that are relatively static and singular in nature - shares of a private placement for example - the services of a self-directed IRA custodian can be sufficient. In this model, the custodian holds the funds and executes transactions on behalf of the IRA at your direction.

With more interactive or time-sensitive investments, having that 3rd party custodian as the processing layer can become inefficient in terms of paperwork, delays and per-transaction fees. In this case, the implementation of the IRA-owned LLC format will become the better tool for the job. It will cost more to setup, but will save money over time as well as providing much greater control and flexibility to you as the account holder.


Since you mentioned SEP IRA that suggests that you might be self-employed. If that is the case then you may want to consider truly self-directed Solo 401k plan, which does not require a custodian and offers checkbook control. If you qualify for it - this would be much better choice compared to SD IRA. 

@David Davidson

An LLC is not required for a SEP IRA, though you may want one to gain checkbook control. If you do not have any full-time employees, a Solo 401k may be even better. The 401k does not require an LLC, even for checkbook control.

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