This is promoted by people marketing “Self-Directed IRAs.”  I use quotes because the truth is almost all IRAs are self directed.  The individual selects the product they want to deposit their IRA funds into.  What they are referring to is the investment of IRA funds into non-traditional assets such as real estate, private holdings, promissory notes and I’m even hearing about “crowdfunding” with IRA assets.  The LLC strategy came about as a means to cut the IRA Custodian even further out of the loop by allowing the IRA owner to control transactions within the IRA without the need for any paperwork being submitted and/or obtaining any approvals from the IRA Custodian.  This involves establishing an LLC which names the IRA owner as the manager and receives all it’s funding from the IRA, effectively making the IRA the LLC owner. 

It is claimed that this provides a loophole by which the LLC can open a checking account and the IRA owner, acting as the LLC manager, can simply write checks to handle all of the LLCs financial affairs.  The thought is that the checking account is owned by the LLC, not the IRA, therefore providing a buffer between the IRA assets and the IRA owner. Personally, I think this is a very shaky proposition at best to have the IRA owner directly handle the assets within the in a way that the IRA Custodian has no ability to oversee whatsoever.  The court rulings that are claimed to have backed this strategy have in reality never made any direct ruling or commentary about this strategy.

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