How Can I Set Up A Second 401(K) Account At My LLC? Tips and Suggestion

Question: I work and have an LLC to my name! I want to know if I can open a second 401(k) at my LLC. I already have an existing one with the company that I work in. Whenever I try doing some research on this topic, I end up getting confused as there are so many conflicting thoughts on the net. My employer did say I can have as many 401(K) accounts as I desire, but I would like to make sure it is the right thing to do and I won’t get into undue trouble. Thank you! Appreciate your help on this.


Answer: The one common reason why people look at 401(K) is because it forms an integral part of one’s retirement plan. The thing you need to remember here is that as long you have no stake in the company you work in, you can have with them, which would be an Independent 401(K) and still go in for a second 401(K) with your Limited liability Company. What you can also do is fund at your LLC with the income you earn from the company you work in.

Now to the restrictions aspect- your aggregate salary contributions to both the plans should not go above US $49000 per annum or US $54,500 if your age is 50 or older by the end of the year. The annual independent 401(K) contribution is made up of 2 parts- the salary deferral and profit sharing contributions. The total contribution allowed is an aggregate of these two.

The LLC offers all the members involved who choose to take an independent 401(K) plan only a limited liability. The case being, the owners & board members of the aforesaid LLC are entitled to only the profits and not held liable for any liability, debt, or obligations. Of course we understand that your retirement plan is the most vital and your top priority, you need to protect them from creditors or others. Through the LLC, you will be able to protect your retirement plan, plus the assets earned from other sources.

When planning for a second 401(K), there are a few things to remember-

1.       How far ahead are your plans? How secure are your finances- personal and at LLC?

2.       Do you have retirement plans in place? Or are you going to be using this 401(K) as one of the tools?

3.       Do you know the amount you earn via 401(K) from the company you work in and how much it adds up to in a year?

4.       What kind of business is your LLC? Have you fulfilled all financial formalities in that company before chalking out a 401(K)?

You should also bear in mind that if the LLC is operated as an individual corporation, your 401(K) contributions to the chosen plan will be based on the earnings/salary you receive from the LLC.

The biggest advantage with an LLC is that you need not disclose all information and sundry when applying for the second 401(K). They don’t insist on providing information related to the other members, business acumen and so on. What this means is that your employer will not be able to trace.

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