ForumsSolo 401kSolo 401k as Single Member of LLC

Forums Solo 401k Solo 401k as Single Member of LLC

  • Solo 401k as Single Member of LLC

    2 Replies
  • Top SubjectSolo 401k
    Top ForumsSolo 401k

    Blaine C.
    Top SubjectSolo 401k

    May 12, 2022 at 8:56 am

    My Solo401k is the single member of a LLC created to invest in real estate backed assets. Let’s call it A, LLC. Can A, LLC invest in B, LLC as a 20% owner? Can B, LLC subsequently procure a loan without causing problems for either A, LLC or my Solo401k? Will UBIT be triggered?

    Blaine C.
  • George Blower

    Top SubjectSolo 401k,Solo 401k Contributions
    Top ForumsSolo 401k, Solo 401k Contributions

    George Blower

    George Blower

    Top SubjectSolo 401k,Solo 401k Contributions

    May 13, 2022 at 3:27 am

    Thank you for your post!

    1) A Solo 401k can certainly invest in a single-member LLC which in turn invests in another LLC provided that (i) the LLC is not owned by a disqualified person (e.g. the solo 401k owner) or (ii) interacting (directly or indirectly) with a disqualified person (e.g. the Solo 401k owner, etc.) or otherwise benefiting a disqualified person (note: the second LLC can’t be taxed as an S-corp).

    2) The second LLC may obtain a loan from unrelated person provided that the Solo 401k, first LLC, solo 401k owner (or other disqualified person) does not guarantee (or is otherwise obligated on) such loan.

    3) Whether the investment in such second LLC will expose the Solo 401k to unrelated business income tax or unrelated debt finance income tax is generally subject to the facts and circumstances. For example, income attributable to a Solo 401k’s equity investment in the active business (e.g. providing goods and/or services) where such business is taxed as a pass-through (e.g. partnership) is generally subject to UBIT. On the other hand, there is a Solo 401k exception to UDFI with respect to income from real estate subject to acquisition indebtedness.

    Please check out the podcast with

    @shamilton

    Steven Hamilton

    Top SubjectSolo 401k,IRA LLC

    https://www.mysolo401k.net/podcast-deep-dive-re-unrelated-business-income-tax-ubit-unrelated-debt-financed-income-tax-udfi/

  • Top SubjectSolo 401k
    Top ForumsSolo 401k

    Blaine C.
    Top SubjectSolo 401k

    May 14, 2022 at 3:04 pm

    Thank you George. Just what I needed.

    Blaine C.

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