Multiple LLC's and Solo 401k

5 Replies

I am new to BP and this is my first post. I want to take this opportunity to thank all members for all the topics that I have read on these forums these past couple days. Wonderful stuffs and tremendously helpful.

Me and my wife have 4 LLC's and each has rental properties producing passive income. We also have rental properties outside of those LLC's too. I have a full-time job with a 401k. My wife have a part-time job with a Simple IRA.

We plan to open two Solo 401k, husband and wife, and fund it using distribution from the LLC's, is that ok? I also plan to roll over our old 401k accounts to these later too.

Or, does each LLC's have to sponsor separate Solo 401k for me and my wife? That means 2, husband and wife, accounts time 4 LLC's make 8 separate Solo 401k accounts. That kind of set up with small funding chunk everywhere, is not very conducive to making investment.

Thank you for any info you may offer.


@Nick Ho   You can't use passive income to fund a solo 401K. What I did, with help from @Dmitriy Fomichenko , is to set up a solo 401K on a LLC that I use for the renovation of my properties. That is active income (billed to my holding LLC) that can fund my 401k. I am also doing flips using that LLC, which can also fund the 401k.

The other thing you can do is funnel money from your wife's Simple IRA into her side of the solo 401k. If you can afford it, she could do a max contribution and then do a transfer each year.

There is a lot of information out there about  solo 401k plans, and some important rules to know. If you go to Dmitriy's website there is a lot of information. You can also find good info at many other provider websites.

@Walt Payne hit the nail on the head.

One thing I'll say about spousal participation is the he/she is actually required to be an employee of the company. Just being a spouse is not enough. He/she must actually make a wage. Furthermore, each plan documents will have some specific language about spousal participation and potentially a requirement for "x" hours annually to continue participation.

Like Walt stated, only funds that you actively earn can count towards future contributions to the new plan. Sometimes it's necessary to rethink your entity structure in order to maximize your contribution potential.

Keep up posted. :)

Sorry for all the typos. Autocorrect on my iPhone stepped in a few times.

@Nick Ho  

based on what you described above you (and your wife) are not eligible for the Solo 401k. You need earned self-employed income and right now you said that the only income in your LLC is the passive rental income.

There are ways to create active self-employment activity, feel free to PM me and we can set time time to discuss your situation in further details.  

Thank you for giving me the head up about passive income. Forgot about that.

@Dmitriy I will sure PM you soon.


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