Solo 401k for multiple businesses question

QUESTIONS: I have some questions regarding opening a self-directed solo 401k.

 Here are some facts:

The owner is the 100% owner of several LLC's, disregarded entities for tax purposes - income/loss reported on his Form 1040 Schedule C.

Entity 1 - projected net income of $330,000

Entity 2 - projected net LOSS of    $41,000

Entity 3 - projected net income of  $30,000

Entity #1 does have 1 employee - Entity 2 & 3 have -0- employees.

He is also the 100% owner of an S Corp and takes a "reasonable salary" for IRS purposes - that entity has 2 other employees - no retirement plan.

My understanding is that he would be eligible to set up a Solo 401k plan based on the net income of the LLC's.

1. Does he qualify to set one up?

2. If so, does he qualify to fund it to the maximum amount of $50K?

The objective is then for the Solo 401k plan to fund a new entity either with loans and/or as the owner. 

Thank you. TF

ANSWER:  Yes a Solo 401k plan allows for contributions up to $50,000 for tax year 2012 and $51,000 for tax year 2013. When an individual seeking to open a Solo 401k is self employed and involved in multiple businesses, the IRS requires that all of that individuals businesse's be combined for determining if he or she qualifies to participate in a Solo 401k.  This is known as the controlled group rules.  Visit controlled group rules to learn more.

Based on the information that you have provided, your client is involved in multiple business that have full-time employees. Therefore, at first glance it appears that he does not qualify for a Solo 401k. However, he would qualify for a traditional 401k, a type of 401k that must be offered to full-time employees. Please contact us because as a Solo 401k provider we can open a traditional 401k that can also be invested in alternative investments such as real estate, tax liens and precious metals.