income for solo401k passive income

[Glenn N.]

I would like  to start a solo401k, I had someone draw up a structure. This structure would be A C-Corp holding company with two hard money lending LLCs ( passive income disregarded entity) paying the C-corp fees to run them. Then the C-corp would open a Solo 401K for me and fund it with the fees. One lawyer said it was completely legit, But I want to fund the whole 401k, and to do that it be income off almost 200K and how would I justify these using fees? I had another lawyer say you cannot fund this with passive income from the two LLCs with passive income. I would have had the two LLCs 'c that was lending but I had to retract the s status because you cannot have more than 3 years of passive income in an s-corp . Seems like it would be pushing the envelope and asking for an audit and fines.

[Mike S.]

You have to take a salary out of the LLC. This salary (minus the withholding) can fund the solo 401k. On top of it, the LLC can also add 25% of your salary as profit sharing if the plan permits it. There is a maximum yearly contribution that you can put into it (for employee contributions and profit sharing).

You can also roll over fund from your IRA and maybe other 401, 403, 457 plans that you have if the sponsor authorize it (usually after separation of employment only).