[USER]

My wife and I have two rental properties, each in an LLC. We also have W2 jobs where we max out 401ks. In addition, we also max out every other retirement account we are allowed to.

I am wondering if we can set up some sort of retirement account(s) for us inside of the LLCs that may or may not allow a separate bucket in which to contribute.  Currently, we do not take any sort of salary from the LLCs, and they are taxed as S corps (so they flow to our personal returns).

It looks like one possibility is to to a solo401k. From what I can tell, these plans are not lumped into the same bucket as the 401k at work, essentially allowing me to contribute to both. It seems, though, that we would need to pay ourselves to do this. That said, would it be possible to pay ourselves just enough to get the full employer and employee contribution to the plan? I would assume that if we paid ourselves less than the maximum employee contribution ($23k for 2024), there would be no real tax consequences. Is this correct?

Also, it looks like a SEP IRA appears to be an option. It looks like we would have to take salary (and associated tax ramifications) just so the company could could contribute 25% of that salary. This seems like not as good of a deal as the solo401k.

Also, I read somewhere that it depends on how the business makes money as to whether you can do anything. Each LLC simply owns a house and leases it out. Does this affect the ability to do anything?

Finally, if there is no way to do personal retirement plans, is there anything the company can do in it’s name (we are the only members) that would accomplish essentially the same thing?

I know this is a lot, but all of my research is a dead end. Every time I look for something about this, I end up with websites about buying real estate in your retirement account, which is not what I want to do.

Any help or at least pointing me in a direction I can research would be super helpful. Thanks!

[Jim]

Did a CPA tell you to hold the real estate in an S Corp? Generally that’s a big no no. Also to answer your question no retirement plan can be set up for a business that doesn’t have w2 or self employment income.

[Wendy]

Your LLC is different from mine. Mine is a pass-through sole proprietor LLC. But I have a SEP-IRA. No employees. No salary. I can contribute 20% of my net income from that business (up to a certain limit).

My rental property is not in an LLC, so that is not included.

Useful: I am unfortunately in an ugly situation where I’m a part of an LLC (STR properties) that wishes to buy me out

[Kath]

Ummm the employee contributions max out at $23,000 this year across the board. It’s not a new allowance with a solo. What can be utilized is any employer amount up to the total allowed annual contribution limit, minus what your W2 employer contributes.

So the LLC’s are getting passive income? And they are making a minimum of around $60,000 plus in profit annually?

As Jim said, it’s a normal no no for s corp. LLC is fine for the legal protection it affords but an S corp is odd if all they have is 1 property in each?!

[Sarah]

The employee side of the solo absolutely does get lumped in with the W2 401k. But you could still contribute to the employer side.

[Author]

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