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Self-directed Solo 401k FAQ: Can I invest my Solo 401k funds in private company shares?
QUESTION:
Can I invest a solo 401k in private company shares?
RESPONSE:
While a solo 401k is allowed to invest in shares of a private company that neither your or family members are officers, directors, employees, or 50% more shareholders when the ownership percentages are aggregated, such an investment made through a solo 401k plan will trigger unrelated business income tax (UBIT) if the entity type is an LLC. To learn more about UBIT, see the following page: https://www.mysolo401k.net/ubit-and-udif-differences/
However, UBIT won’t be triggered if the entity type is a C-corporation.
Lastly, the entity type cannot be an S-corporation as this type of entity does not allow for retirement plans including solo 401k plans or IRAs to be shareholders.
