California Residents with a Self-Directed IRA. How should I structure it and what are the fees?

Created March 07, 2022 21:45

California residents can choose a Self-Directed IRA with or without an LLC. A Self-Directed Solo 401(k) does not need to register with the Secretary of State or the Franchise Tax Board.

California residents can contact Rocket Dollar for a Self-Directed custodial IRA without an LLC.

You have the option to choose a plan that best fits your investment needs. Silver plans consist of a one-time setup fee of $360 and $20 a month, and our Gold plan consists of a $600 one-time setup fee and $30 a month. Please contact our sales team if you aren't sure which structure is best for you at 1-855-762-5383 Monday through Friday from 9:00 am to 4:30 pm CT. This structure could have additional requirements for final deal approval and forgo the benefits of having an IRA with an LLC, however, it does avoid additional LLC fees from the California state government.

Can I buy a Rocket Dollar with direct custody at Silver pricing for $360 and $20/month?

Our Direct Custody product is now live for all customers opening new Traditional or Roth IRA accounts as of March 2022.

How does the pricing compare for my options?

$360 Silver account signup (one time)
$20 per month compliance fee

IRA LLC for a California Resident

$800 minimum each year paid to California (please check with the California Franchise Tax Board for the exact amount) Note: an LLC from outside California typically still incurs the FTB fees.
$70 one time fee to register your Rocket Dollar Colorado IRA LLC as a foreign entity in California (please check with the California Secretary of State's Office for the exact amount)

What reporting requirements will I need to do for my LLC?

California has significant reporting requirements and will send notice even for an out-of-state LLC managed by a resident in the state of California.
Initial Registration on the Secretary of State Website $70
Statement of Information (every 2 years) $20 fee
Annual LLC Franchise Tax (every year) $800
Estimated Fee for LLCs (every year) but only if your LLC receives an income of over $250,000 a year
LLC Return of Income (every year) The LLC is usually a disregarded entity for state tax purposes.
Please review all reporting requirements with a California experienced CPA if you need extra help. California requirements can change at any time at the California Gov website.

I think I can avoid this $800 fee...

Can the franchise tax board really reach out to business activity out of state, if I'm investing out of state? California's Franchise Tax Board has surprisingly far-reaching law and authority. They have backed this up in numerous court cases. Other states and legal experts have questioned this authority, but so far it has held up in California high courts over numerous cases.

What if I open an IRA with a trust? After consulting our legal teams, an IRA with a trust does not have nearly the same amount of case law to support it compared to the IRA LLC, which has several prominent and landmark cases to support do's and don'ts inside of a Self-Directed IRA LLC. We offer an IRA LLC, Solo 401(k) using a trust, and a direct custody IRA without an LLC below.

What if I just don't want to pay for it? This might not be the account for you. The California Franchise Tax Board can and will pursue those that do not pay or do not submit reporting.

Direct Custody IRA Option (without an LLC)

(Fees updated January 2022)

$360 Silver account signup fee (one time) $20 per month compliance fee.
$600 Gold account signup fee (one time) $30 per month compliance fee.
- The Gold account covers four wires per year.
- Premium support and expedited transfers.
American Estate and Trust (AET) custodies almost all investments that ERISA allows. However, the following investments are not administratively feasible.
- - Foreign Investments
  - Trading on margin
  - Life insurance (in IRA’s)
  - S Corporations
  - Real Estate directly owned by the IRA in specific geographical areas: (listed below)
  - Florida, New York, Wisconsin, Michigan, South Carolina, Illinois, Tennessee, and North Carolina. This applies to direct property ownership. PPMs, LPs, or fund investments are ok. You as a client are investing in an entity in these structures, rather than asking a custodian partner to hold the property directly. If you wish to own a property as directly as possible in these states, please consider our IRA LLC product.

Direct Custody Flow V2 Black KB

I'm ready to get started with direct custody. What's next?

Sign up for a Rocket Dollar IRA at rocketdollar.com/signup
Select DIRECT CUSTODY account for either $360 and $20 a month or $600 and $30 a month.

What is the timeline?

With a deal review, even with a Gold Account, the Direct Asset could take up to 3 weeks.

Can I still purchase an asset?

Keep in mind that you will have to complete a deal review with our custody partner if you choose a direct custody IRA. Because our custody partner has custody of the asset they can decide if they will accept the investment or not.

Currently, at this time, our custody partner is not accepting deal reviews for Cryptocurrency and will not hold those investments. You would need to use our LLC product.

If you still want to purchase crypto, you can always do so in California but at this time must pay the $800 yearly franchise board tax fee and register the Colorado LLC that Rocket Dollar would open for you. We are continuing to work on solutions for Crypto investors.

What about a Self-Directed Solo 401(k)?

A Self-Directed Solo 401(k) is a trust, not an LLC, and thus the extra LLC considerations do not apply. California residents can enjoy the same Rocket Dollar Silver $600 signup and $30 per month fee, with no new investment fees. This can be a great alternative if you qualify.