Use your Solo (Self-Directed) 401(k) Plan to build your own business and gain checkbook control over your plan.
 

Your Solo 401(k) Plan may do these things for you (and more): 

1.   Invest in your own business and provide additional working capital when needed.

2.   Loan yourself money.

3.   Own a business in your Solo 401(k) Plan that pays you a salary and allows you to continue to make tax-deductible contributions to the Plan.

4.   Provide loans to your business for working capital or capital needs.

5.   Buy, rent, or flip real estate.

6.   Buy real estate with debt without tax consequences (UBIT).

7.   Invest in what you understand and can control.

8.   Invest in almost anything – almost anywhere.

9.   Self-direct your investments – so that no custodian is needed.

10.  Directly hold, own, and control your retirement accounts and owe fees to no one.  

HOW IT WORKS FOR YOU! 

 What are the steps to setting up and operating your Solo (Self-Directed) 401(k) Plan?

1.   Establish the entity that will set up the Solo 401(k) Plan. The Solo 401(k) Plan must be attached to an actual business. The business may not have employees other than the owner or the owner and spouse.

   a.   This entity will typically be the lead entity for your financial structure. See the “Illustrated Plan” below. (See also www.capstrategies.com/strategicexamples for more information on tax-efficient asset protection structures.)

    b.   Careful structuring of your overall structure will result in long-term tax savings, improved asset protection, and better utilization of your retirement account.

    c.   If you subsequently have employees in any entity which you and/or your spouse own or control (more than 50%), those employees must be included in the 401(k) Plan. (There are alternatives and options that should be carefully considered before acting.)

2.   Establish the Solo 401(k) Plan, with yourself as the Trustee.  (Contact us for a plan provider.)

3.   Open an account for the Plan. We recommend that you establish the account through a brokerage or through your local bank. (Remember the account provider is not establishing the Plan, they are simply providing banking services to the plan.

4.   Rollover the funds you have determined into the Solo 401(k) Plan. This should be handled as a direct rollover. Rollovers may come from your former employer’s 401(k) plan, your IRA plan, your 403(b) plan, your retirement system funds, your DROP plan funds, and any other “qualified” plan.

5.   Establish a Single-Member LLC(SMLLC) that will be 100% owned by the Solo 401(k) Plan. You may be the Manager of the SMLLC. There may be one or more of these SMLLCs, depending up on your structure – they are useful for dividing and limiting any potential liability that might arise from an investment of the Plan.

6.   Subsequently, the SMLLC becomes the focal point for all of the business and non-passive investment activities of the Plan. (See Illustrated Plan below.)

7.   Operate your structure. 

ILLUSTRATED PLAN
 This is an example of a basic structure. Your actual structure may be less complicated or may have significant other features. The ultimate structure for your situation is determined by your investment and business activities, your need for liquidity, and your need to grow your wealth in and out of protected structures. Contact us for help.

 

 

Once you have moved your money into your Solo 401(k) Plan account, your Plan forms and funds a Single Member LLC through which to do its investment activities, especially the non-passive investments.   

Each significant type investment should be held by a different single-member LLC owned by the 401(k) Plan in order to isolate any legal issues that might arise from 401(k) funds invested elsewhere.

The Single-Member LLC (one or more) (with you as the Manager) may then invest as shown below.

Where possible, we recommend that real estate investments, including real estate mortgages, be held through a Land Trust. If you are not familiar with the tremendous benefits available through the use of land trusts for real estate transactions, we invite you to visit our main web site, www.capstrategies.com.

Few investors have the same needs or desires for investing their funds, and every region of the country has its own rules and customs. This is the reason that we work with each individual client to design the plan that will work best for them – that will help them reach their investment goals in the most tax-efficient and protected manner considering their region of the country and the amount of available funds for their program.

We recommend that you review www.capstrategies.com for more information on tax-efficient asset protection structures for business and investors and for other information about practical tax, estate and asset protection planning.