Solo 401k Trust Questions

I found you through a Google search, and am investigating Self-Directed Solo 401k as a possible strategy for asset protection of my Traditional IRA before assuming Trusteeship of a relative's Trust, which would expose me to Unlimited liability, so far as I can determine. I was thinking of incorporating several side activities that I now pursue as a hobby, for profit, which, under the Corporate form,  which would allow me to establish a Solo 401(k). Always trying to think "What could possibly go wrong with this picture?", I wondered if the Solo 401(k) can out live the Company it is established under, (It  IS a separate trust, right?), or if things did not go as planned for my new Company, and I had to discontinue and unwind it, would the 401(k) ALSO have to be dissolved and transferred back into a Traditional IRA or (???) or could the Solo 401(k) continue with existing assets and management(Me), just not any contributions from the ( now dissolved) Company? I don't know who better to ask, since most of my existing advisors were unaware of Solo 401(k)'s! 

Thanks. J. Kersch

First, to qualify for Self-Directed Solo 401k (a/k/a Solo 401k, Individual 401k, Individual k, etc.), you must be self-employed with no full-time employees. Self-employment income consists of income generated from services performed not passive income. 

You can learn more about qualifying for Solo 401k by reading following blog:

http://www.mysolo401k.net/Self-employment-Compensation-for-Self-Directed-Solo-401k-or-Self-Directed-401k.html

Second, the IRS rules do not currently allow the IRA non-spouse beneficiary to transfer his or her beneficiary IRA to a Solo 401k. Further, while Solo 401k falls under the trust umbrella, it is still quite different from other trust types such as family or living trusts. Therefore, you cannot commingle the Solo 401k trust funds with other forms of trusts.  

Third, once you cease self-employment through the company for which the Solo 401k was established for, the rules currently require that the Self-Directed Solo 401k be either transferred to an IRA or another qualified plan such as a 401k or the funds distributed from the Solo 401k, with the ladder leading to tax consequences.

You can learn more about Solo 401k by reading IRS Publication 560; here's the link:

http://www.irs.gov/pub/irs-pdf/p560.pdf