Form a 401(K) LLC With a Real Attorney

Yes, with a nonrecourse loan, meaning the lender's only remedy is the property itself and no personal guarantee is permitted. Unlike an IRA, a 401(K) plan generally owes no unrelated debt financed income tax on that leverage under Section 514(c)(9). Our attorneys review every loan document to confirm no clause quietly creates recourse.

The sequence is plan first, entity second: adopt or verify a Solo 401(K) plan document that permits alternative investments and LLC ownership, then our attorneys file the articles of organization, draft the operating agreement naming the plan as member, obtain the EIN, and open the accounts. Sequence matters, because funding out of order has tax consequences.

Yes. The LLC maintains its own account funded exclusively by plan capital, every expense is paid from it, and every dollar of income returns to it. Plan money and personal money never touch. Our attorneys deliver a written payment protocol at formation, because one personal payment can taint the entire plan.

The plan is tax exempt, so the LLC's rental and investment income generally flows in untaxed. Once total plan assets exceed the IRS threshold, the plan files an annual Form 5500EZ, and any unrelated business income is reported on Form 990T. Our attorneys coordinate both filings with your accountant so neither is missed.

Substantially more than any IRA allows: contributions combine an employee deferral with an employer profit sharing component, plus a catch up amount at age 50, under limits the IRS adjusts annually. The combined ceiling routinely reaches several times the IRA limit. Our attorneys confirm the current year's numbers and coordinate the calculation with your accountant.

Yes. A properly drafted plan can accept Roth deferrals, letting part of the plan grow tax free while the rest grows tax deferred, and both sources can invest through the LLC. Our attorneys confirm your plan document supports Roth accounts and that the LLC's books track each source separately.

Yes. A spouse who earns income from your business can participate in the Solo 401(K) without disqualifying its owner only status, effectively doubling the household's contribution capacity, and the plan invests through the same LLC. Our attorneys document the spouse's participation and the plan's ownership of the entity correctly.

Generally yes. A Solo 401(K) may permit participant loans up to the statutory limits, a feature no IRA offers. The loan comes from the plan itself, never from the LLC, because borrowing from the LLC is a prohibited transaction. Our attorneys draft the plan and entity documents so those two sources never blur.

No. Your labor is a prohibited contribution of services to the plan, no matter how minor the repair or how much money it saves. All work must be performed by unrelated parties paid from the LLC account. Our attorneys are blunt about this rule, because sweat equity is the violation investors most want to commit.

No. You, your spouse, your parents, and your children are disqualified persons, and any personal use of a plan asset, even a weekend at market rent, is a prohibited transaction. Our attorneys give you a written list of who may never touch each asset, because candor here is what protects the plan.

Co investment between you and your own plan is disqualified person territory and should be treated as presumptively prohibited, with narrow exceptions that must be structured at formation and never adjusted afterward. Our attorneys analyze the facts honestly, and more often than not we recommend keeping plan and personal capital in separate deals.

Hiring full time employees changes your obligations, because a qualified plan generally cannot exclude eligible employees, and ignoring that rule risks plan disqualification. It does not end the strategy, but it demands prompt attorney attention. Our attorneys review the transition and amend the plan before the hire creates a problem.

The plan cannot simply continue without its sponsoring business. The assets are typically rolled to a self directed IRA, and our attorneys amend the operating agreement so the IRA becomes the LLC's member, preserving the structure in modified form. We manage the sequence so the rollover never touches prohibited transaction territory.

When the plan holds, or plans to hold, more than one property or venture. A single LLC pools every asset behind one liability wall, while the Series Special Purpose LLC gives each asset its own compartment under the same plan. Our attorneys can convert the single LLC to the series structure as your portfolio grows.

Clean books for the LLC, plan records documenting contributions and the investment in the LLC, an annual valuation of plan assets, and the Form 5500EZ once the threshold is crossed. Documentation is what survives an audit. Our attorneys establish the record framework at formation and maintain it through annual compliance.

The recurring failures are funding the LLC before the plan document permits it, paying an LLC expense personally, doing your own repair work, missing the Form 5500EZ, signing a loan with hidden recourse language, and hiring an employee without amending the plan. Our attorneys maintain the annual checklist so each risk is checked, not remembered.

Because the structure layers a qualified retirement plan, the prohibited transaction rules, and entity drafting on top of each other, and an error in any layer can cost the plan its tax status. Filing websites cannot advise on any of it. AmeriLawyer is a licensed law firm practicing since 1990. Email webclerk@amerilawyer.com to speak with an attorney.