BACKGROUND &
QUESTIONS: Hope you've been well. My
wife and I established separate non prototype self-directed 401k accounts at Fidelity with your assistance. We are in possession of our checkbooks and
looking for investments. When we identify a potential investment, do we
need to do anything procedurally before or after mailing the check?
We are considering investing in a friend’s
car title loan business in Georgia. He would pay us monthly interest and
loan it out to his customers at a higher monthly rate. What documentation
or procedures are needed if any for us to receive say quarterly interest
payments? Can he just mail us a check and we deposit it back into the
solo 401k fidelity checking account? See any land mines we need to avoid?
ANSWERS: When the
solo 401k loans money to a third party, this process is treated as a promissory
note investment. Therefore, the solo
401k promissory note investment rules apply. For example, the solo 401k must
earn a fair interest return and note payments must flow back to the solo 401k
account. Please click here
to review a sample solo 401k promissory note procedure.
Lastly, since you have brokerage
accounts at Fidelity for the self-directed solo 401k that we offer, the
promissory note payments are deposited in these accounts. The note payments
must be made payable in the name of the solo 401k and mailed to Fidelity for
deposit into the solo 401k accounts.
Thank you,
Additional
Information
