Best way to shelter 2021 income from LLC?

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AlphaPilot
Posts: 61
Joined: Wed Jun 20, 2018 8:29 am

Best way to shelter 2021 income from LLC?

Post by AlphaPilot »

I am co-owner of a 2 member LLC. We don't have any employees or have W2 pay. We are 'paid' via 'member draws' after each job we do. Unfortunately I wasn't thinking straight, and in December I zero'd out the LLC checking account. We like to not leave any 'income' in the LLC account come year end because we already have to pay taxes on it, and it just makes things clean when starting the new fiscal year for us to each make an $1,000 member contribution to cover our new year expenses.

Long story short, I am trying to figure out if I can open an i401k (which I believe is also labeled Solo 401k?) for myself, and contribute some of my income from 2021 to lower my 2021 personal taxes. I don't want to make any deferral payments or contributions on behalf of the LLC to the i401k, but instead want to just use my own savings to fund the i401k that I am planning on opening with Vanguard.

When going thru the open process, I have an option that asks about "effective date" - I am assuming here I need to put Jan 1, 2021 even though this is being opened Jan xx, 2022?

Am I wrong in understanding that I can personally contribute to the i401k with funds in my personal bank/savings? Or was I suppose to contribute to this i401k directly from the LLC checking account?
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