BACKGROUND / QUESTION: I am looking for a way to loan money to the Corp from my solo 401k plan.
I am a 25% shareholder,
employee and corp treasurer of the S-corp in question. My father also
owns 25%. The other 50% is owned by a non-family member.
ANSWER: Unfortunately, you cannot loan your solo 401k
as an investment (promissory note investment) to a company that you work for. Reason being, pursuant to the 401k prohibited
transaction rules the solo 401k owner/participant is a disqualified person and
therefore cannot invest his or her solo 401k funds in a business that the solo
401k owner works for.
However, a solution may
be for you to take a loan from your solo 401k plan. Because the borrowed funds will no longer be considered 401k
funds, you may use the funds however you wish including for business
investment.
Regards,
Nick in Texas
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