Solo 401k

[Account Closed]

I have two questions:

1. My wife and I are forming an LLC. Can we both have a solo 401K?
2. Can a portion of a standard 401k be rolled over into a solo 401K?

Thanks for the help

[Doreen Chaisson]

As to whether or not your current 401(k)s can be rolled into a new Solo(k), it would depend if you and your wife are still employed by the companies that sponsor the 401(k)s. If you are, you need to check with the company's Plan Administrator to see if you can take what is called an "In Service Distribution".

Also keep in mind that any 'profit sharing' and 'salary deferrals' for your new Solo(k) can only come from the income you earn from the LLC that sponsors the Solo(k). You cannot funnel earnings from any other jobs you may have into the Solo(k).

Keep in mind that when you own an operating company with a Solo(k) or an IRA, 100% of the net income generated by that operating company, after exemptions and deductions, is subject to UBIT tax. A Real Estate Operating Company, set up to buy and flip properties, is considered an operating company. I'd suggest you work with a knowledgeable attorney when structuring your investment and check with the IRS or your own state's taxing authority regarding the threshold at which passive investing status switches to "dealer status", making your LLC an operating company.