Active income LLC tied to a Solo K also used for passive income

[Gabrielle T.]

Hi everyone, there's something I'm still confused about after talking to different people and reading through BP posts. I have a Solo K tied to an LLC, taxed as an S-Corp, that I set up for active income purpose - meaning I'd like to contribute active income from the LLC into the Solo K. Can I also use that income to generate passive income by buying rentals? Or should I have 2 different Solo Ks? In the future, if I also plan on creating a separate LLC for passive income purpose - can the 2 LLCs co-use the single SoloK? Or should I, in the future, have 2 LLCs and 2 SoloKs - one each for active, one each for passive?

[Dmitriy Fomichenko]

Gabrielle,

you don't need to Solo Ks. You just need one. Contributions to your Solo 401k are based on your self-employed compensation. Income from passive investments such as rental income can not be used to contribute to Solo 401k. You could use the same entity that you use for your active business activity to hold rentals, but that is not a good practice. The reason you put rentals into the LLC is to limit your liability protection. You are doing the opposite by mixing your business with passive investments. Seek guidance from a qualified expert.