Looking for comments on how to obtain a Solo 401(k) plan

[Gang Liang]

After comparing IRA LLC and Solo 401(k), I feel that Solo 401(k) is a better option to me. Since I dont' have a small business yet, my first thought to obtain a Solo 401(k) is as follows:

1. Open an LLC to have a part time small business;
2. Rollover my current IRA to a Solo 401(k) plan.

Both the LLC and the Solo 401(k) will be focused on real estate investment. Do you think it is a viable path to get a Solo 401(k) plan this way? I wish I can do both simultaneously, and would like to hear your opinions... Thanks!

[Brian Eastman]

@Gang Liang

Your plan sounds viable. In order for the LLC to qualify as a sponsor for a Solo 4001k, it will have be be generating earned income, not passive earnings. If your real estate activities with the LLC will be things like wholesaling, flipping or new development, this will work. If your personal LLC real estate investing will be passive rentals, then that is not a "business" that can sponsor a 401k plan.

You can start the Solo 401k as soon as the LLC is in business. You do not need to wait around. So long as you have a qualifying business venture with the intent to generate a profit, that business can sponsor a 401k plan.