I own three LLCs (LLC #1, LLC #2, and LLC #3). My Solo 401k is adopted by LLC #3. However, LLC #1 generates significant income. Can I make contributions to the Solo 401k from LLC #1?
No. Contributions to your Solo 401k must come from the business that adopted it.
If LLC #1 generates most of the income, then you may want to restate your Solo 401k so that LLC #1 becomes the adopting employer of the plan. For assistance in restating your plan, please contact your Account Manager with Sense Financial.
Another option would be to set up a holding company for the three separate companies. The holding company would own the other companies. The other companies would then be subsidiary companies, doing business while being owned by the holding company. For this option, the Solo 401k would need to be restated with the holding company as the adopting employer of the plan.
The subsidiary companies need to be established as pass-through entities; meaning they don’t pay taxation at their own level. The subsidiaries would pass the earnings up to the parent company.
For example, the subsidiary company could be structured as a single-member LLC. The LLC would have one owner or one member which would be the parent company. As a single-member LLC, the subsidiary company would not have to file a tax return as a pass-through entity. The IRS instructs pass-through entities to be disregarded for tax purposes.
For further clarification, please consult your CPA or tax advisor.