Solo 401k Plan Update to List New Self-Employed Business Sponsor

QUESTIONS:

Due to the expansion of my wife’s business, I have a few questions regarding my wife’s Solo 401k:

1. She will begin to take other real estate agents as her associates, they are not her employees. She wants to setup a new LLC for this. How will this impact her current solo401k? Does she have to move the existing solo401k under the new LLC?

2. I am also considering leaving my current job to help her expansion, so I will need to setup my own solo401k. In order to maximize the $53,000 contribution for both of us, is it better to have two different business entities, or we can achieve the same 2x$53,000 contribution under the same solo401k plan?

ANSWERS:

Good question. Provided the the other associates are brought on  as contractors instead of W-2 employees ( Compliance note: a solo 401k is only for business owners and their spouses), then the new LLC can sponsor the existing solo 401k trust.  As the solo 401k plan provider, we would simply update the plan documents to list the new LLC (the new self-employed business). We would also add you (the spouse) to the plan if you are are performing self-employment activity under the same LLC.
Both of these updates are covered in our annual fee, so please keep us posted.
You will then also be able to contribute to the plan based on net- elf-employment income that you generate as an employee under the LLC, which means that you could also contribute the maximum to the solo 401k plan for this year if you have enough self-employment income. You would also have your own separate holding account (bank or brokerage account) under the solo 401k plan.

 

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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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