The Solo 401K Plan is an IRS created qualified retirement plan that was designed specifically for the self-employed. The Solo 401K Plan offers a self employed individual or a small business owner a significant number of retirement and investment opportunities. For example, Like a Self Directed IRA with checkbook control, as the trustee of the Solo 401K Plan, the plan participant (you) will have the freedom to make all investment decisions for your Solo 401K Plan (“checkbook control”) without requiring the consent of a custodian.
Therefore, a Solo 401K plan allows you to eliminate the expense and delays associated with an IRA custodian, enabling one to act quickly when the right investment opportunity presents itself. Like a Self Directed IRA LLC where the IRA holder will serve as the IRA LLC manager, in the case of a Solo 401K Plan, the business owner can serve as trustee of the Solo 401(k) Plan. Accordingly, as the Solo 401K Plan trustee, making an investment is as simple as writing a check straight from the Solo 401K Plan bank account, which can be opened at any local bank or credit union. In addition, unlike a Self Directed IRA with checkbook control with requires the formation of an LLC, with a Solo 401K, any type of business including a sole proprietorship can adopt the plan. The advantage of this, especially in a State like California, is the business owner does not have to establish another LLC, which comes with filing fees and a minimum California franchise fee of $800. In other words, the fact that an LLC does not have to be established since California imposes an $800 minimum annual franchise fee on all entities doing business in California. Whereas, if an individual used a Self Directed IRA with checkbook control to make an investment, a special purpose LLC would have to be established. In most states the LLC filing fee is quite minimal (typically around $150) with very small annual filing fees. However, for a State like California, not having to form an LLC offers a significant tax-saving.
In addition, with a Self Directed IRA LLC, a special IRA custodian, often called a Passive Custodian must be used in order to hold the IRA. The IRA funds are then transferred tax-free to the newly established LLC, however, an IRA custodian must still be used as part of the Self Directed IRA LLC process. Whereas, in the case of a Solo 401K Plan, the 401(k) account can be opened at any local bank or credit union in which in most cases do not involve any fees. The ability to open the Solo 401K account at any local bank couples with the ability to adopt the plan without establishing an LLC, makes the Solo 401K the perfect retirement solution for any California retirement investor that is self-employed and looking to make real estate and other investments in California.