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My IRA purchased a land contract for a home. Do I have any personal liability for this contract? If so, how can it be limited?
Because the IRA purchased the land, the land is now directly tied into the the IRA. Therefore, if anyone is injured on the land, the lawsuit can include the entire IRA - the whole pot is considered and not just the property. Therefore, they have liability in that if there is a suit against the land, the IRA is at risk. To limit the liability, I would recommend using an IRA LLC. Your IRA would be the sole owner of the LLC and you, as the IRA owner, are the Manager of the LLC. The IRA LLC is formed by filing a Certificate of Formation with the Secretary of State. Then an Operating Agreement is created designating the IRA as the Member/Owner and the Client as the Manager of the IRA LLC. The IRA will officially “own” the LLC, but the Client will control it. The Operating Agreement is also required to have restrictions to ensure that certain prohibited transactions do not take place.