Marietta, GA · Member since 2017 · 15 posts · 3 votes
I plan to use my Solo 401K for investing in distressed mortgage notes, real estate and possibly private lending. From a business perspective and identity protection, does it make sense to set up an LLC under my Solo K and funnel transactions through the LLC versus my Solo K? In other words, the assets would be purchased/sold as "ABC Solo 401K Trust" versus "Credit Relief, LLC". I know there is more work and costs associated with setting up the LLC. If the asset ends up in some type of litigation, bankruptcy, foreclosure, etc, does it affect me any differently between being "ABC Solo 401K Trust" and "Credit Relief, LLC"...both for asset and identity protection? I would appreciate any feedback, especially from the other Solo 401K folks.
There is not significant difference in holding all plan assets directly under the Solo 401(k) trust as versus within a 401(k) owned LLC.
Where a LLC would provide an advantage is for the purpose of segregating risk assets from non-risk assets within the plan. We have clients holding assets such as real estate that create liability exposure as well as assets such as stocks or notes that really do not create much risk. By holding the property within a plan-owned LLC, they have segregated that asset and sheltered the rest of the plan-held assets from liability created by that property.
Good landlord and liability insurance is a must. You can also obtain insurance as a lender.
Anonymity will not result from a Solo 401k or a Georgia LLC. You could work with a local attorney to use land or personal property trusts under the umbrella of the plan to create some anonymity.
Welcome to BP! I would echo Brian's comments. I haven't worked with attorney located in your area, but if you want to send a message to my Bigger Pockets inbox, I can reply with contact information for a group that is familiar with Solo 401ks and helps clients with tax and legal issues including entity formation all over the country.