Can you open a Solo 401k for an LLC business with multiple partners? When you think “Solo 401(k)” you probably think of a business with one owner. What if your business has more than one owner?
For example, a group of 3 couples who currently own an LLC business want to set up a Solo 401(k) plan sponsored by their partnership. There are no current employees, just 3 couples (spouses) who are all owners of the same company. Here are some additional Solo 401(k) rules you need to know to successfully start one.
Can you open a Solo 401(k) for an LLC with multiple partners/owners?
An LLC can open a Solo 401(k) plan (with or without common law employees). If the only employees are the partners (members in the case of an LLC), then it should qualify as a “one-participant plan” (i.e., solo 401(k) plan) but they should check with the Instructions to Form 5500-EZ or 5500 on the IRS website since there are other requirements to qualify as such (no leased employees, etc.).
To create a One Participant 401(k) for a business with multiple partners, the business owners need to choose one or more members to be the named plan trustee(s). Our documentation accommodates either one trustee or two co-trustees. As a result, we will only allow those individuals to be listed on the application.
Who signs the documents?
Any of the members can apply for the plan. Generally, any member of an LLC (or general partner in a partnership) can legally bind all members/partners when they sign a contract on behalf of the LLC/partnership. We would just need one of the couples to sign the application. We recommend that they sign it as “[Name], member” just to clarify that they are applying on behalf of the LLC and not personally.
Do you have questions about setting up a Solo 401(k) for your LLC business? If you have no full-time employees in any of the companies you own, you could qualify. Contact us and schedule a consultation. Remember to include your competent tax advisor to discuss forming your retirement plans.