How does the Solo 401k LLC work?

Considering a Special Purpose LLC (SP LLC)? Read on to learn how they work.

Updated over a week ago

With a Solo 401k, an LLC is not required to get the benefits of direct checkbook access. Your Solo 401k Trust can operate similarly to an LLC, as you are the trustee and the authorized signor on the bank account.

However, sometimes an LLC is useful for purposes of asset protection or for owning assets in other countries where they may be most familiar with drafting the asset documents in the name of an LLC.

If you’d like to use an LLC for any reason, your Solo 401k can simply own a newly formed LLC, which you can manage.

The Special Purpose LLC (SP LLC) is an asset of your Solo 401k plan.

The sole member of the LLC is your 401k trust, and you are the manager. The SP LLC has its own tax iD number, and its own bank account:

Funds go first into your Solo 401k bank or brokerage account via rollovers or contributions. You then invest 401k funds into the LLC (an asset of your 401k trust). Once funds are moved from the 401k bank account to the LLC bank account, the LLC can hold its own investments.

This provides some separation between the 401k assets and those in your SP LLC.

You do not need to include your business name, personal name or 401k trust name in your desired LLC name.

Most clients choose a totally different name for the SP LLC for greater privacy.

Want to add an SP LLC to your Solo 401k? Contact our team and we'll get started forming your new LLC right away.

Did this answer your question?