QUESTION: If a self directed solo 401k is the sole member of LLC then can debt financing be used?
ANSWER: Yes debt financing (solo 401k non-recourse loan) can be used if the solo 401k is the sole member of the newly created LLC.
QUESTION: Can the LLC manager hire contractors to perform repair work on Solo 401k owned LLC?
ANSWER: Since the Solo 401k is investing in the LLC and the property will be owned by the LLC, you as the manager of the LLC will be responsible for hiring contractors to perform repairs on the property. Generally the Solo 401k owner self manages his solo 401k as well as the LLC. Note that you cannot perform the repairs since your solo 401k is the member of the LLC as it would be deemed a solo 401k prohibited transaction.
QUESTION: In a scenario where solo 401k is the only member and LLC has 100% equity in real estate, can the LLC take a line of credit to make further real estate investments?
ANSWER: A line of credit is basically a loan; therefore, the loan to the LLC would need to be a non-recourse loan because the solo 401k is the member of the LLC. You can learn more about non-recourse loan rules by reading following blogs from our main website as well as our sister website.
Thank you, Ron from Florida
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