Solo 401k question - Moving operations to a new company

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Topic Author
satishkumard
Posts: 3
Joined: Tue Sep 09, 2014 6:58 am

Solo 401k question - Moving operations to a new company

Post by satishkumard »

Hi,

I have Minnesota(MN) based s-corp where my wife and I are employees(only employees). Been contributing to solo 401k(with Vanguard) for the last 8years both as employee and employer. We moved to Texas this year in July, planning to open a Texas(TX) based s-corp and move the operations from MN company to avoid additional MN taxes(9.85% Foreign Corporation taxes since don’t have a physical address in MN) starting next year. if I have to start new solo 401k I believe below are the steps

1. Terminate the solo 401k with MN company
2. rollover the funds to employee accounts from MN company
3. open new solo 401k(with Vanguard) with TX based company
4. start contributing to TX company starting Jan 1st 2022
5. File final taxes with MN company in 2023 showing 0 revenue in 2022(I could do this in 2022 filing as well thought of waiting another year)

Did any of you has gone through similar situation. Does Vanguard or IRS has any restrictions? Please advice if there is any misunderstanding or point me to any IRS or Vanguard documentation which I can refer too. Appreciate all your feedback.

Thanks
Misenplace
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Joined: Mon Feb 01, 2016 9:46 pm

Re: Solo 401k question - Moving operations to a new company

Post by Misenplace »

Welcome to the forum. Hopefully, the solo 401(k) plan experts will chime in here, but there may be some problems with your plan. I am no expert but there is an issue with opening up a new solo 401(k) within 6 months of closing one. However, I think you can get around this by amending the plan, not closing it.
Take a look at some of the recent threads on solo 401(k)s- here are a few:
Subject: solo 401k screw up
Subject: Opened 2 Solo 401(k) by mistake. What to do now?
I recommend that you not do anything until you understand the ramifications.
Topic Author
satishkumard
Posts: 3
Joined: Tue Sep 09, 2014 6:58 am

Re: Solo 401k question - Moving operations to a new company

Post by satishkumard »

Does the 6 month rule apply Even if they are two different entities?
SuzBanyan
Posts: 804
Joined: Thu Jun 02, 2016 11:20 am

Re: Solo 401k question - Moving operations to a new company

Post by SuzBanyan »

satishkumard wrote: Sat Nov 20, 2021 11:26 pm Does the 6 month rule apply Even if they are two different entities?
My understanding is that it does matter because both companies are owned by the same people. I believe you can amend your 401k to add your new TX corporation as another employer. While you are doing that, you may also want to add yourself as an employer so that in the future you can keep the 401k even if neither the TX nor the MN corporations are in existence.
Topic Author
satishkumard
Posts: 3
Joined: Tue Sep 09, 2014 6:58 am

Re: Solo 401k question - Moving operations to a new company

Post by satishkumard »

Thank you for the feedback. I will call vanguard and amend the plan to add TX and myself as an employer.
dkeeney
Posts: 17
Joined: Thu May 24, 2018 1:50 pm

Re: Solo 401k question - Moving operations to a new company

Post by dkeeney »

satishkumard wrote: Sat Nov 20, 2021 7:57 pm
Did any of you has gone through similar situation.
Since this has significant legal and tax ramifications, I would suggest speaking with a professional who is familiar with the rules. I happen to have established my solo-K while in Texas with the help of July Business Services in Waco. I strongly recommend connecting with their team to ask these questions.

https://www.julyservices.com/

Sales Questions
insidesales@julyservices.com
888.333.5859, ext. 7420

Note: I am *not* compensated in any way for this recommendation.
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