Self-Directed Solo 401k Private Company Investment (passive only) Purchase Procedure
This is a summary of how to invest/purchase private shares in a private company (e.g., C Corp., LLC, and Limited Partnership) with your Solo 401k—also referred to as Self-Directed 401k, Self-Directed Solo 401k, Solo K, Individual 401k or Single 401k.
After you have opened and funded your Solo 401k checking account, here are the next steps in the private investment process.
Documents/forms provided by investment entity
- Private Placement Memorandum/Offering Memorandum
- Articles of Organization
- Certificate from Secretary of State
- Subscription Agreement/Stock Purchase Agreement
- Accredited Investor Representations and Investor Questionnaire
- Depending on investment entity type, one of the following:
If Corporation: Company By-Laws
If LLC: Operating Agreement
If Limited Partnership: Partnership Agreement
- Additional documents to help determine if company will be successful:
Company’s latest Financial statements (for example, Balance Sheet)
Company’s 2 to 5 year financial forecast
Registering /titling investment documents
Review and confirm that private investment documents are:
- Properly registered under the Solo 401k as the owner
- That the Solo 401k’s EIN is listed
- That you have signed as trustee of the Solo 401k
Example of how your Solo 401k’s investment interest in the entity should read:
Jane Do, Trustee of ABC Solo 401k Trust
After all documents have been reviewed, approved and executed, it’s time to fund the investment by writing a check from your Solo 401k’s checking account made payable to the investment entity.
All investment gains must flow back to your Solo 401k’s checking account not your personal bank account.
1099-DIV & K-1 QUESTION:
During last year’s tax-prep season, I received a total of sixteen 1099s and K-1s filed against the EIN of my solo-401k. I ignored these (for the second consecutive year).
My solo 401k trust is a member of a private investment fund. Do I need to file the K-1 and 1099-DIV with the IRS?