The two layers of money flow
Your plan operates across two distinct layers. Each layer has its own rules, and transactions cannot jump between them.
Layer 1: The plan entity (investing layer). This is your LLC, IRA Trust, or Solo 401(k) trust. All investment activity happens here: paying expenses, receiving income, executing purchases and sales.
Layer 2: The plan and the plan holder (funding and distribution layer). This is where money moves between you and the plan: contributions going in, rollovers arriving from another plan, distributions coming out to you.
Confusing these two layers, or trying to shortcut between them, is where prohibited transactions and unintended distributions are born.
Layer 1: What flows through the plan entity
All investment transactions run through the plan entity's bank account. No personal funds enter this layer. No plan funds exit to you personally from this layer.
| Transaction | Correct flow |
|---|---|
| Pay investment expense (repairs, insurance, closing costs) | From plan entity checking account |
| Receive rental income or loan repayment | Into plan entity checking account |
| Pay earnest money deposit | Wire or check from plan entity account |
| Receive sale proceeds | Into plan entity checking account |
| Pay property management fees | From plan entity checking account |
Important: Never pay a plan expense from personal funds, even temporarily. Lending money to your own plan is a prohibited transaction under IRC Section 4975.
Layer 2: What must go through the custodian or be formally reported
This layer governs money moving between you and the plan. For IRA-based plans, every transaction in this layer routes through the IRA custodian - IRA Resources. For the Solo 401(k), transactions go directly to the trust account but require formal documentation and reporting.
IRA LLC and IRA Trust
| Transaction | How it works |
|---|---|
| New contribution | Deposited to your IRA at IRA Resources; custodian then funds the LLC or trust |
| Rollover or transfer in | Received by IRA Resources from the sending institution; custodian then funds the entity |
| Distribution to you | Funds return from the entity to IRA Resources; custodian processes the distribution and issues Form 1099-R |
| Rollover out to another plan | Funds return from entity to IRA Resources; custodian issues distribution to receiving institution |
You cannot contribute directly to the LLC or trust checking account, and you cannot take a distribution directly from it. The custodian is the gateway in both directions.
Solo 401(k)
The Solo 401(k) has no custodian, so transactions move directly through the trust account, but they must be formally documented and reported.
| Transaction | How it works |
|---|---|
| Employee contribution | Deposited directly to the trust checking account; you record the contribution type and amount |
| Employer profit-sharing contribution | Deposited directly to trust account; recorded separately from employee deferrals |
| Rollover or transfer in | Received directly into trust account from sending institution; documented with rollover records |
| Distribution to you | Paid from trust account directly to you; you file Form 1099-R as plan administrator |
| Rollover out to another plan | Paid from trust account to receiving institution; you file Form 1099-R as plan administrator |
The absence of a custodian gives the Solo 401(k) more direct control, but it places the documentation burden entirely on you as trustee and plan administrator.
Frequently Asked Questions
Can I contribute money directly to my IRA LLC or IRA Trust checking account?
No. All IRA contributions must be processed through your custodian, IRA Resources, who document the transaction issue required reporting. A direct deposit to the entity account bypasses that process entirely and would not be treated as a valid contribution.
What if I need to take a distribution from my IRA LLC?
You must first move funds from the LLC or trust checking account back to your IRA at IRA Resources. The custodian then processes the distribution, withholds taxes if directed, and issues Form 1099-R. You cannot distribute directly from the entity account to yourself.
What happens if plan income accidentally lands in my personal account?
It is treated as a distribution: taxable in the year received, and subject to early withdrawal penalties if you are under 59½. Intent does not change the tax treatment. If this occurs, consult a tax professional immediately.