Why Do Some Document Preparers & Attorneys Charge a Lot More to Form an IRA LLC than You Charge?

Question:  Why do some document preparers and attorneys charge substantially more than the $997 you charge to form an IRA LLC?

Answer:  Because they can get away with it.  Most attorneys who may routinely form limited liability companies never form an LLC that has an IRA or a retirement plan as a member so they are unlikely to form this type of LLC when asked.  Most of the small number of attorneys and document preparers who actually form IRA LLCs charge far too much because they have little, if any competition, and they know that is it very unlikely a prospective client/customer will be able to find somebody else with the knowledge and experience to form an IRA LLC.  These types charge far too much because they believe they have a monopoly and can set a high price because clients/customers have no other place to go to form an IRA LLC.

A few years ago I went to a seminar here in Phoenix, Arizona, about how to use self-directed IRA funds to invest in real estate through an IRA LLC.  The person who gave the presentation was an attorney not licensed to practice law in Arizona.  He told the group the many reasons they should form an IRA LLC, and said he formed them for $4,000.  Since I was forming Arizona LLCs (not IRA LLCs) at that time for $599 including all the costs, (which is the same amount I charge today) I was shocked that he not only charged so much, but that people actually paid him that off the charts amount.  I asked the speaker how he justified charging that much, but the answer he gave did not justify the price in my mind.  That is when I decided I would learn about IRA LLCs so I could form them for my clients at a much lower cost and provide an outstanding total package.

No Specific Language Required by IRS or Tax Law to Form an IRA LLC

If an attorney or document preparer tells you that there are some “magic” provisions that must be in the Articles of Organization or in the Operating Agreement or some special hoops that must be jumped through to form an IRA LLC, that person is not being truthful.  LLCs are formed pursuant to state laws, which do not require any special provisions or actions to be taken to form an LLC just because an IRA or a retirement plan will be a member of the LLC.  Nor does the Internal Revenue Code of 1986, as amended, require that the Articles of Organization, the Operating Agreement or any other documents used in connection with the formation of an IRA LLC contain any specific language.

Specific Language I Include in the Operating Agreement of an IRA LLC

Even though neither Arizona law nor federal income tax law require that any IRA specific provisions be included in the formation documents of an IRA LLC, I do include IRA and retirement plan provisions in the Operating Agreement I prepare for my IRA LLCs.  My Operating Agreement contains selected language from Internal Revenue Code Sections 408 and 4975 (prohibited transactions).  Section 408 prohibits an IRA from pledging any of its assets as security for a loan and from investing in collectibles.  Section 4975 contains the prohibited transaction rules.

I include these IRA specific provisions in my Operating Agreement because:

  • I want the people involved with my IRA LLCs to where to find the prohibited transaction rules and the other restrictions that if violated by the IRA LLC could cause tax penalties and/or disqualification of the IRA.
  • I hope the people involved with my IRA LLCs will actually read the provisions.

Why I Charge $997 for an IRA LLC & $597 for a non-IRA LLC

I charge more to prepare an IRA LLC than I charge to form a non-IRA LLC because:

  1. I do add the Internal Revenue Code Section 408 and 4975 language in the Operating Agreement, which I believe does add value, but not $3,000 of value.
  2. I get a federal employer ID number for each IRA LLC.
  3. I am an attorney who does not charge for questions about forming IRA LLCs.
  4. The entire package I give my IRA LLC clients is worth a lot more than the $997.  See “What We Do When Hired to Form Your IRA LLC.”
Why Do Some Document Preparers & Attorneys Charge a Lot More to Form an IRA LLC than You Charge?2018-05-13T13:58:53-07:00

What We Do When Hired to Form Your IRA LLC

When people hire me to form an IRA LLC, I don’t just fill in the blanks in a state created form, file it with the Arizona Corporation Commission and give you an Operating Agreement created for non-IRA LLCs.  Here is a list of the 13 services I provide when I am hired to form an Arizona IRA LLC:

1.  Unlimited telephone calls with Arizona IRA LLC attorney Richard Keyt (480-664-7478) to answer your questions about forming the company.

2.  Name selection advice.

3.  Discuss any formation issues & the Articles of Organization with the Custodian and make any changes to the Articles requested by the contact person or the Custodian.

4.  File the Articles of Organization with the Arizona Corporation Commission (“ACC”) and get the ACC’s approval the day we are paid and you approve your LLC formation questionnaire.

5.  The day we file the Articles of Organization we will send an email to the IRA account owner that contains the ACC’s approved and filed Articles of Organization.  The manager needs this document to open the LLC’s bank account.

6.  Obtain a federal employer ID number from the IRS for the IRA LLC and email it to the IRA account owner.  Before we can get the EIN the IRA account owner must authorize us to do so by completing, signing and sending to us an IRS Form SS-4 found here: https://tinyurl.com/yy2hvqpb.  For detailed help with the SS-4 see Richard Keyt’s article called How to Complete IRS Form SS-4.

7.  Give each manager access to LLC attorney Richard Keyt’s Arizona-specific 170+ page ebook called the “Arizona LLC Operations Manual” customized for your IRA LLC.  Chapter 3 of this ebook is a checklist of 25+ LLC operational tasks that should be done in the first 75 days.

8.  Give you Rick Keyt’s 40+ page Charging Order Enhanced Operating Agreement custom drafted for your IRA LLC with provisions specifically applicable only to IRA LLCs and members that are IRAs.

9.  Act as the IRA LLC’s statutory agent for its first year at no charge.

10.  Prepare organizational resolutions of the members authorizing the issuance of membership interests.

11.  Prepare membership certificates for all members that are used to prove ownership of the IRA LLC.

12.  Give the IRA account owner a copy of the IRS statutes & regulations applicable to IRA LLCs.

13.  Give the IRA account owner a copy of Richard Keyt’s article “Frequently Asked Questions about Prohibited Transactions,” which explains common transactions the IRA LLC must avoid to stay in good standing with the IRS.

14.  Give the contact person a high-quality Arizona LLC Portfolio with tabs in which to keep all important IRA LLC documents.

15.  Give the contact person a free one year membership in our LLC Compliance Alert email system ($297 value).

16.  If PENSCO Trust is a Custodian:  Richard Keyt will sign and deliver to PENSCO a Special Advisor Engagement and Representation Letter, which is required by PENSCO for certain IRA LLCs.

If you have any questions about any thing mentioned above or about forming an IRA LLC, call Richard Keyt at 480-664-7478.

What We Do When Hired to Form Your IRA LLC2020-05-20T06:08:42-07:00
Go to Top