Can I loan my Solo 401k funds to my spouse’s business?

QUESTION:

My wife recently started a business (she formed an LLC if that matters) but she wasn’t approved for the business loan she applied for. Are there any tax/legal ramifications for me providing her company with a business loan from my solo 401k?

ANSWER:

That would be a solo 401k prohibited transaction because it is your wife’s business. However, you can take a solo 401(k) participant loan up to the statutory limit which is 50% of your solo 401k balance not to exceed 50,000, and you can use the loan proceeds however you wish including investing them in her business. The reason the 401k loan is allowed is because when you borrow from your own 401(k) plan the funds are no longer consider 401(k) funds.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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