Two Member LLC Solo 401k Real Estate Investment Property

BACKGROUND: A couple of quick questions concerning my Trust and setting myself up for Real Estate purchases…

My thought is to establish an LLC with two members, myself and my , with equal membership.

QUESTIONS:  Is this the most advisable way to go? I'm thinking this is the best way to leverage my personal dollars and my 401K dollars to purchase income property…

Also, Should I establish a separate and new TIN for the new LLC? I think this would be best. But I want to be sure.

ANSWER: Pooling personal funds and 401k funds in an LLC to invest in real estate is one method. The following should be considered under this scenario.

1. The LLC has to be funded for the first time (i.e.,units cannot have previously been issued), otherwise prohibited transaction implications arise.

2. The LLC operating agreement should contain specific language pertaining to the 401k and investment rules. 

3. The LLC will be deemed a multiple member LLC so it will be treated as a partnership. Therefore, you will need to file a federal tax return (Form 1065 and K1's--one for each member) on an annual basis.

4. The LLC will require its own bank account and EIN.

5. No financing may be incorporated because you are personally investing in the LLC.

The other method of co-investing alongside your solo 401k is under a tenants-in-common transaction. To learn more about this method .

To read frequently asked questions pertaining to the solo 401k rules, click on .