| Money Movement | Correct Path | Required Form |
|---|---|---|
| Contribution or rollover in | Source account, then IRA Resources, then entity account | Deposit or Rollover, then Buy Direction Letter |
| Taking a distribution | Entity account, then IRA Resources, then you | Sell Direction Letter, then Distribution form |
| Moving funds to another IRA | Entity account, then IRA Resources, then receiving custodian | Sell Direction Letter, then transfer request from receiving institution |
| Paying an investment expense | Entity account only | None, the custodian is not involved |
| Receiving investment income | Entity account only | None, the custodian is not involved |
What is the custodian funding rule for a checkbook control IRA?
Your IRA custodian is always part of the path when money enters or exits the plan. Contributions and rollovers flow in through IRA Resources before reaching your entity account. Distributions and transfers flow out through IRA Resources after cash from the entity has been sent back to the IRA. The entity checking account handles investment activity only.
This applies to both the IRA LLC and IRA Trust structures. It is not a procedural preference. It is a compliance requirement.
How does the two-layer IRA and entity structure work?
Every Checkbook Control IRA plan operates on two distinct layers, and keeping them straight is the foundation of staying compliant.
The first layer is your IRA account at IRA Resources. This is the tax-sheltered retirement account, the legal wrapper that gives your investments their tax-preferred status. IRA Resources holds the account, processes all funding and distribution events, and reports activity to the IRS annually.
The second layer is your plan entity, the LLC or Trust that the IRA owns. The entity itself is best understood as the IRA's investment, much like a private fund the IRA holds an interest in. Your entity checking account lives here. This is where investment activity happens: purchasing assets, paying expenses, receiving income. The entity does not independently send or receive retirement funds.
Every dollar that enters or exits your retirement plan passes through the IRA layer first. The entity is a powerful investment tool, but it operates entirely within that structure, never around it.
How do contributions and rollovers reach your entity account?
All contributions, rollovers, and transfers into your Checkbook Control IRA are received and processed by IRA Resources. Once IRA Resources has recorded the funds, you submit a Buy Direction Letter instructing IRA Resources to invest the IRA into your entity. IRA Resources sends the cash to your entity checking account via check or wire, and from there you invest.
Important: The critical error to avoid here is bypassing this sequence. If a rollover check is deposited directly into your LLC or Trust checking account rather than sent to IRA Resources first, the IRS treats that deposit as a taxable distribution.
The funding path is always: source account, then IRA Resources, then entity checking account. For the mechanics specific to your entity type, see How do I add funds to my IRA Trust? or How do I add funds to my IRA LLC?.
How do distributions and transfers leave the plan?
Distributions work in reverse, and the IRA layer is equally required on the way out. There are two common scenarios: taking a distribution to yourself, and moving funds to another IRA via transfer. In both cases, cash from the entity must first be sent to IRA Resources. You initiate this by submitting a Sell Direction Letter and sending the funds from your entity checking account to IRA Resources. IRA Resources receives and deposits the cash into your IRA account, recording the transaction as a liquidation of the IRA's interest in the entity. Once those funds are in the IRA account, IRA Resources processes the outgoing event.
Taking a distribution. Suppose you want to take a $20,000 distribution from your IRA LLC. You submit a Sell Direction Letter to IRA Resources and send $20,000 from your LLC checking account to IRA Resources. IRA Resources deposits the cash into your IRA account and records the liquidation. You then submit a Distribution form to IRA Resources, which processes the payment to you, withholds applicable taxes if required, and issues a Form 1099-R reporting the distribution to the IRS. You cannot receive a distribution directly from the LLC checking account to your personal account; the cash must clear the IRA layer first.
Moving funds to another IRA. Suppose you want to move $50,000 from your Checkbook Control IRA to a Traditional IRA at another institution. You submit a Sell Direction Letter to IRA Resources and send $50,000 from your entity checking account to IRA Resources. IRA Resources deposits the cash into your IRA account and records the liquidation. You then submit a transfer request with the receiving institution. IRA-to-IRA transfers are always initiated by the receiving custodian, so that institution contacts IRA Resources directly, and IRA Resources fulfills the transfer on receipt of the request.
What does IRA Resources handle, and what do you handle?
IRA Resources handles every custodial event: receiving contributions and rollovers, processing Buy and Sell Direction Letters, executing distributions, and filing the required IRS reporting. You handle the entity side: managing the checking account, executing investment transactions, and submitting the direction letters that tell IRA Resources what to do next. Neither side substitutes for the other. Every transaction requires both.
What can the entity checking account actually be used for?
The entity checking account has one function: investment transactions. It is not a channel for contributions in, and it is not a channel for distributions or transfers out.
Frequently Asked Questions
What happens if a rollover check is deposited directly into my LLC or Trust account?
The IRS treats that deposit as a taxable distribution, not a rollover. Income tax applies to the full amount, plus a 10 percent early distribution penalty if you are under 59 1/2. Once the 60-day rollover window closes, there is no way to correct it, so route the check to IRA Resources first, every time.
Does this rule apply to a Solo 401(k) as well as an IRA LLC or IRA Trust?
This article covers the Checkbook Control IRA LLC and IRA Trust structures specifically. A Solo 401(k) uses a different funding mechanism since you, as trustee of the plan, hold that authority directly rather than a third-party custodian.
Can I pay an investment expense directly from the entity account without involving IRA Resources?
Yes. Investment-related expenses, like property taxes, repairs, or LLC filing fees, are paid directly from the entity checking account, and investment income like rent or interest is received there too. That is exactly what the account exists for. IRA Resources is only part of the path when money crosses in or out of the plan itself.
Is there a minimum dollar amount below which I can skip sending funds through IRA Resources?
No. The rule applies regardless of the amount involved. A $500 distribution follows the same custodial path as a $500,000 one; there is no de minimis exception.
How do I know which form to use for a given transaction?
IRA Resources provides the required forms for every custodial event, from Direction Letters to distribution paperwork. If you are ever unsure which form applies to your situation, contact IRA Resources directly before initiating any movement of funds. Using the wrong form, or skipping one, is what turns a routine transaction into a compliance problem.
Next Steps
Once you understand why funds route through IRA Resources, the next step is applying it to your specific structure. See IRA Trust - Setup Process, IRA LLC - Setup Process, or Solo 401(k) - Setup Process for the full account-opening and funding sequence, or continue to IRA rollovers & transfers for how direct and indirect rollovers work in practice.