The actual owner of the LLC is the IRA.
Single member LLCs may be viewed as disregarded entities for tax filing purposes. Whenever creating the LLC structure this feature could be picked; so, the LLC will not need to register for or pay any taxes on gains. Instead, it is the LLC’s member that is liable for the LLC’s tax responsibilities, as if they earned the money themselves. Since your IRA is the owner, and there’s a custodian set up who reports to the IRS on behalf of your IRA, you will not need to file or pay taxes on your LLC’s profits.
You’re the manager for your IRA LLC, not a member; this allows you full control and authority over your IRA without taking a distribution or extra liabilities. Your capabilities as manager for your LLC is to explore, make and maintain investments and investment holdings for your IRA LLC. Keep in your mind, however, that IRAs have unrelated business taxed income should they get involved in an unrelated trade or business or if they realize profits off of debt financing. These transactions are certainly not prohibited, but they are taxable.
Another benefit of using an IRA LLC is the iron-clad asset protection. An IRA is a federally protected trust, so creditors or litigators coming for you can’t go for your IRA. In addition, members of an LLC (in this situation, your IRA) are protected from creditors and litigators pursuing the LLC. It is very difficult and troublesome to penetrate the integrity of the IRA LLC structure. Even if somebody managed to sue your IRA LLC and get a favorable ruling from the court, it would still be hard for them to obtain any cash. It is different from state to state, but most state statutes do not allow judgment or lien holders any control or rights to assets under an LLC; instead they are given rights to distributions from the LLC. Because an IRA LLC is setup as a retirement vehicle, you’re not even needed to take distributions till you are seventy and a half (not at all if it is a Roth IRA). Meanwhile, you can make investments as you wish, even should it be a loan to your brother… Depending on the state and the specific situation, one could even be able to pass the tax liability over to a creditor who holds a charging order against your LLC.