All Forum Posts by: Savannah Wallace

Hi Daniel,

I have a lot of clients who utilize their SDIRAs to invest in real estate, and this is generally the advice I provide when they are first starting out.

I recommend setting up an LLC under your SDIRA—often called a "checkbook control" LLC. This structure offers several advantages including asset protection, privacy (your IRA isn't listed on the deed as the owner) and faster transactions as you don't have to wait for custodian approval. Note that the SDIRA must own 100% of the LLC. You cannot personally own or benefit from the LLC, and all income/expenses must go through the SDIRA.

As you've noted, you'll need to obtain a non-recourse loan when using your SDIRA to invest in real estate, otherwise, you'll generate UBIT as a result of UDFI (Unrelated debt-financed income). Another strategy to consider in the future is using a Solo 401(k) instead of an IRA, as Solo 401(k)s are generally exempt from UDFI on real estate investments.

Here’s a resource I have for my clients for obtaining a non-recourse loan -

RainStar Capital

We know that the IRS has strict rules regarding prohibited transactions and self-dealing. You cannot buy, sell, or lease the property to or from your SDIRA, nor can you personally use the property. You cannot take a salary, directly handle negotiations, or provide services (like repairs or management) to the property. All work must be performed by third parties, and all payments must come from the SDIRA. All income generated by the property must go back into the SDIRA, and all expenses must be paid from the SDIRA

Good luck with this new property!

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Hi Whitney,

I have a lot of clients who utilize their SDIRAs to invest in real estate, but often they neglect to set up an LLC for the property, and it is something that I always recommend. Glad to see that is already something that is in the works for you!

As you've noted, you'll need to obtain a non-recourse loan when using your SDIRA to invest in real estate, otherwise, you'll generate UBIT as a result of UDFI (Unrelated debt-financed income). Another strategy to consider in the future is using a Solo 401(k) instead of an IRA, as Solo 401(k)s are generally exempt from UDFI on real estate investments.

We know that the IRS has strict rules regarding prohibited transactions and self-dealing. You cannot buy, sell, or lease the property to or from your SDIRA, nor can you personally use the property. You cannot take a salary, directly handle negotiations, or provide services (like repairs or management) to the property. All work must be performed by third parties, and all payments must come from the SDIRA. All income generated by the property must go back into the SDIRA, and all expenses must be paid from the SDIRA.

Here’s a resource I have for my clients for obtaining a non-recourse loan -  RainStar Capital

Good luck with this new property!

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Hello Adam, 

My recommendation is to establish a brand new LLC in AR to hold the property. This new LLC would list both you and your partner as its members.

Conversely, transferring your solely-owned North Carolina property into the existing NCa LLC, where both you and your partner are already designated as members, would inadvertently grant your partner ownership rights to that specific property. This is because within the structure of an LLC, members typically share in the ownership of the assets held by the company according to their membership interests.

Creating a separate AR LLC specifically for the new venture with your partner allows for a clear distinction between your individually held assets and those owned jointly through the new investment.

While there are inexpensive DIY options out there, I recommend working with a local attorney to help you set up your LLC, especially since you have a partner involved. In the DIY documents, I've found that important sections are frequently omitted, which can create challenges in day-to-day operations and long-term planning. Having a well-crafted Operating Agreement is crucial for a partnership. Terms regarding authority, roles, membership transfers, dissolution, etc., should be carefully outlined to mitigate any disputes.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

You, Mar 27, 7:46 AM

Hello Hardick, 

Congratulations on this new investment! 

Setting up an LLC for your rental property is something that I strongly recommend for all of my clients to provide them with asset protection, especially when you're looking at a partnership.

LLCs can help shield you from personal liability if a tenant were to ever sue as well as offer protection against creditors in case of a personal judgment through charging order protection, when the LLC has been structured appropriately.

Also, depending on the structure, you can keep your name off the public record as the owner of the property and even as part of the LLC. For my clients, I recommend that they place the properties in an LLC that has been formed in the state where the property is located and have the member of that LLC be a Wyoming LLC. This provides for both anonymity as well as charging order protection.

While there are inexpensive DIY options out there, I recommend working with a local attorney to help you set up your LLC. I've had the opportunity to review a number of templates from companies, like LegalZoom, and have found that they often lack the necessary detail and thoroughness required for effective business management. Important sections are frequently omitted, which can create challenges in day-to-day operations and long-term planning. Having a well-crafted Operating Agreement is crucial for a partnership. Terms regarding authority, roles, membership transfers, dissolution, etc., should be carefully outlined to mitigate any disputes.

I recommend working with a local attorney to help craft documents that address all your needs and allow for long-term growth and expansion, or, at the very least, have an attorney review the Operating Agreements you draft on your own or through a DIY company and suggest revisions so that it better suits your needs.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

One of the most common challenges my clients face is opening a business bank account. As Phil recommended, it’s essential to work with a business banker. Business bankers are well-versed in the legal structures of various entities and understand the specific requirements for opening accounts.

Before your going to the bank, make sure you have all the necessary documentation. At a minimum, you'll need your filed Articles of Organization and your entity's EIN. The banker may also request your Operating Agreement or a resolution authorizing you to open the account on behalf of the entity. If you don't already have these documents, I highly recommend having them professionally drafted. A well-prepared Operating Agreement is not only helpful for opening a bank account but also for managing your business, as it outlines decision-making processes and clarifies authority within the company. This added structure further separates you from the LLC, helping to maintain the integrity of the corporate veil.

Some banks my clients have had success with include Axos Bank, Novo, and NBKC.



Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Hi Heather! 

I love that you're looking to give back to local nonprofits! I work with hundreds of organizations, and they are always looking for funding and help. Especially with federal funding being in a precarious state right now, local assistance is so needed. 

Here are a couple of things to keep in mind when you are looking to donate. 

First, if you are thinking about donating your time or professional expertise, be aware that the IRS only allows you to deduct the out-of-pocket expenses directly related to your volunteer work, not the value of your services. For example, if you typically charge $200 per hour and provide two hours of your professional services to a nonprofit, you cannot claim a $400 deduction. Instead, you can only deduct any actual expenses you incurred, such as supplies or travel costs.

Another crucial consideration is the limitation on charitable deductions based on your adjusted gross income (AGI). The rules differ depending on the type of donation and the entity making the donation. For individuals, S-Corporations, or partnerships, cash donations are generally deductible up to 60% of your AGI. Donations of property, on the other hand, are subject to lower limits-typically between 30% and 50%, depending on how long you have owned the asset and the type of property donated. If your business is structured as a C-Corporation, the deduction limit is even lower: both cash and property donations are capped at 10% of the corporation’s net income.

In addition to cash, property, or professional services, you might also consider volunteering your time in a non-professional capacity. While this can be incredibly valuable to the organization, remember that, as mentioned earlier, only your unreimbursed expenses are tax-deductible, not the value of your time.

Before making any donation, always confirm the charitable status of the organization. It is essential to verify that the nonprofit is currently recognized as a tax-exempt 501(c)(3) organization by the IRS. You can check the IRS website to ensure the organization maintains its compliance and eligibility. If the nonprofit has lost its status or is not in good standing, your donation may not be tax-deductible.

Finally, make sure you receive a proper donor acknowledgment letter from the organization. This letter should comply with IRS Publication 1771, which specifies the language and details that must be included for your donation to be deductible. Without this acknowledgment, the IRS may disallow your deduction, regardless of the amount or type of contribution you made.

Hope this helps! 

 Hi Jean, 

To open a bank account on behalf of an entity, you are required to provide personal information such as your name, address, and SSN. This is generally part of the bank's "Know Your Customer" (KYC) regulation requirements. It's okay to provide this information to the bank. Information provided to the bank is not made public, so you don't hurt any kind of anonymity or asset protection by providing your personal details to the bank. If you listed your personal information, such as your address, with the Secretary of State when you filed the entity, that's when we'd want to consider amending or dissolving and starting the entity over. 

Hi John, 

I have a lot of clients who utilize SDIRAs for real estate investing and this is generally the advice I provide when they are first starting out.

I recommend setting up an LLC under your SDIRA—often called a "checkbook control" LLC. This structure offers several advantage including asset protection, privacy (your IRA isn't listed on the deed as the owner) and faster transactions as you don't have to wait for custodian approval. Note that the SDIRA must own 100% of the LLC. You cannot personally own or benefit from the LLC, and all income/expenses must go through the SDIRA.

If your SDIRA invests in real estate using a loan, be aware that this can generate UBIT as a result of UDFI (Unrelated debt-financed income). If you want to avoid UBIT on leveraged real estate, consider using a Solo 401(k) instead of an IRA, as Solo 401(k)s are generally exempt from UDFI on real estate investments. Or use only non-recourse loans with your SDIRA.

We know that the IRS has strict rules regarding prohibited transactions and self-dealing. You cannot buy, sell, or lease the property to or from your SDIRA, nor can you personally use the property. You cannot take a salary, directly handle negotiations, or provide services (like repairs or management) to the property. All work must be performed by third parties, and all payments must come from the SDIRA. All income generated by the property must go back into the SDIRA, and all expenses must be paid from the SDIRA

Good luck with this new investing strategy!

 Hi Rodrigo, 

It depends on how the LLC is being taxed. You mentioned it is a multi-member LLC, so it is likely taxed as a partnership. If there is income to the LLC, you will have to file a partnership tax return (Form 1065) for the LLC to report the income and expenses. 1065 returns are due annually by March 15th.

 Happy to help! 

Depending on the type of mortgage on the property, if you're looking at moving the property out of your name and into the LLC, then you may benefit from a land trust. Depending on the terms of the mortgage, transferring the property to an LLC may be considered a sale, thus triggering the due-on-sale clause that you mentioned. However, putting it into a land trust first avoids triggering the due on sale clause. Land trusts are revocable grantor trusts and under the Garn St. Germain Act, transfers of property to revocable grantor trusts are exempt, therefore, a transfer to this type of trust will not trigger the due-on-sale clause. Working with an attorney on these transfers is a good strategy.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.