Hey I finally received the information I was looking for regarding a self directed ira owning 100% of the llc. The reason for my original question was because I was hoping to find a "professional" (cpa\attorney) no offense to the ones that already responded, that might have personally jumped into the self directed ira arena other than the real estate side.
Here is what I found out: Your IRA can own 100% of your LLC and can perform any legal activity to generate revenue as long as you do not perform a prohibited transaction or receive a self benefit.
For example your 60 year old man and you need additional income to live. So instead of working for someonelse you decide you want to start a business that picks up dog dodo in people's yard (it amazes but people do this). The first step you do is retain a lawyer pay $500 to create an llc and complete the Form SS-4 (tax id application) with the name of business on line one and line three your name and social security #. You have no employees, so make n\a in the appropriate section. Call up some self directed ira company to setup the ira, transfer minimum funds to the new ira from an existingira , direct the trust company to forward the funds to the bank account under the new llc and tax id number and start advertising your business.
Next thing you know client's (dogs) are calling to setup their weekly appointments and you begin generating income. Deposit the income and pay any related bills you have with the business, reimbursement for fuel, etc. So now the million dollar question, how do you pay yourself? Because you are older than 59 1/2 you take an ira distribution. Just forward funds from the llc checking account, made payable to your ira and the ira custodian cuts you a check. Need these many steps to keep it legal with the irs.
Wow what a concept! Lets take it one more step, what happens if you are the beneficary of a Roth IRA due to death and you are age thirty. At this point you are forced to take minimum distributions tax free over your life time. Let's say the roth has $300k. So invest the roth into a business that it owns 100%, you activity work the business and receive compensation by taking the distribution tax free. There is w-2, no federal or state taxes, no social security, no medicare, and no health benefits. If the entity paid for your health insurance that would be considered and self dealing (not good). God will my kids have it made.
The worst part about all of this is that your current ira custodian does not know nor do they openly tell you about these concepts because they do not make a dime. It does not benefit them for you to control your own funds. I believe the reason why most of the advertisement related to self directed ira's are pushing real estate is because they can charge additional fees for depositing your rent payment, paying your bills related to the property and charge a fee on the HUD. Bastards! Leave them out of it. Create the llc, open an ira, transfer minimum funds or as much as you can to purchase the real estate with out any debt to stay away from the unrelated taxable business income (load of crap), and start making money. My only recommendation is that it is extremely easy to trip over one of the prohibited transactions. So if you are brave enough to leap into this world, tread lightly. Not because what you are doing is illegal, it just has some easy pit falls that could make your entire IRA taxable today.
A person above said you can not have your IRA own some % of your llc and you own the other % personally. This is not entirely true. As long as you are receiving reasonable compensation and do not personally benefit from the ira then you are eligible for this type of setup. Most advisors - accountants, attorneys, financial advisors, self directed ira custodians tell you no, because this type of setup is a very fine line to walk and could easily be viewed as self dealing and your entire ira could be taxable today.
So how do you get around it. Create an llc, have your ira own 49% of it and your s-corp own the other 51%. Start a business that generates real income from third parties - do not take any compensation from the llc, let the profits roll 49% to the ira and 51% to s-corp and pay yourself and health benefits from the s-corp.
My suggestion I would not use a self directed ira unless I was assured of being able to generate additonal income in my ira that is more than the annual contribution. Profits are different than contributions. If you are past the threshold of $150k agi married filing jointly or $90k agi (i think) for single and head of house hold or married filing seperate and greater than $10k income - you are not eligible to make a contribution to the roth or traditional. But if you formed the roth prior to your income being above any of the thresholds stated above, it would be perfectly legal to generate profits in your ira that are greater than any contribution you could make.
Awesome if you have the know how. Very scary if you do not.
Thanks for the input!!!