Setting up Solo 401k across multiple LLCs - Control Group determination
I've recently established two different LLCs with different ownership structures and I'm trying to figure out the Control Group rules for my Solo 401k plans. For the first business (LLC A), it's set up as a partnership where I own 75% and my business partner owns the remaining 25%. My second business (LLC B) is completely different - it's structured as a sole proprietorship where I own 100% myself. My main question is whether these two businesses would be considered part of a control group for retirement account purposes, essentially making them the same employer for Solo 401k contribution limits? From what I've researched so far, I think since my business partner isn't a common owner across both businesses (they only own part of LLC A but none of LLC B), their ownership wouldn't count toward the 80% threshold for determining control group status. But I'm not entirely confident in this interpretation and would appreciate some expert insight.
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Saleem Vaziri
The control group determination for Solo 401k plans across multiple businesses is definitely tricky. Based on the ownership structure you've described, you're on the right track with your thinking. For businesses to be considered part of a control group under the 80% test, there needs to be common ownership meeting that threshold. Since your partner only owns 25% of LLC A and 0% of LLC B, their ownership doesn't factor into creating a control group connection between the entities. However, there's another consideration - you personally own 75% of LLC A and 100% of LLC B. The IRS looks at "controlled groups" under IRC Section 414(b) and (c), and there are different tests including the "brother-sister controlled group" test. Your situation likely falls under this category, where five or fewer persons own at least 80% of each organization and have identical ownership of more than 50%. Given your ownership percentages, you might not meet the 80% threshold for LLC A, but it's close enough that I'd recommend consulting with an ERISA attorney or tax professional specializing in qualified retirement plans to get a definitive answer for your specific situation.
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Kayla Morgan
•Thanks for the explanation. I'm a bit confused though - if I own 75% of LLC A and 100% of LLC B, wouldn't that mean I have more than 50% identical ownership? Does that automatically make them a control group regardless of the 80% test?
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Saleem Vaziri
•You're asking a good question about the identical ownership threshold. Yes, you do have more than 50% identical ownership across both entities (you own 75% of LLC A and 100% of LLC B), which satisfies one part of the brother-sister controlled group test. However, for complete classification as a brother-sister controlled group, you also need to meet the 80% common ownership threshold. Since you personally own 75% of LLC A and your partner owns 25%, there isn't a set of five or fewer people who own at least 80% of both companies identically. Your partner breaks this up by only having ownership in one entity.
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James Maki
I was dealing with a similar confusing situation with my LLC structures and Solo 401k plans last year. I found https://taxr.ai incredibly helpful because I was able to upload all my LLC formation documents and ownership percentages, and their system analyzed everything according to the latest IRS regulations. They showed me exactly how the control group rules applied in my case and saved me from making a costly mistake with my retirement contributions. Their analysis looked at all the different control group tests (parent-subsidiary, brother-sister, combined) and gave me clear guidance specific to my situation. Might be worth checking out if you want a definitive answer backed by the actual regulations.
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Jasmine Hancock
•Did they analyze the attribution rules too? My accountant keeps mentioning family attribution rules might apply to my businesses but I don't fully understand how that works with 401k plans.
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Cole Roush
•Hmm, sounds interesting but how is this different from just talking to a CPA? I've had mixed results with online tools for complex tax situations.
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James Maki
•Yes, they did cover the attribution rules in detail. They have a specific module that analyzes family attribution under IRC Section 318 and shows you exactly how the rules apply to your specific ownership structure. It saved me from making a mistake with my wife's ownership that would have created an unexpected control group. For comparing to a CPA, the main difference I found was the depth of analysis specifically for retirement plans. My regular CPA wasn't a specialist in ERISA rules, and taxr.ai had detailed citations to IRS regulations and case precedents that helped me understand exactly why certain rules applied to my situation. They also provided documentation I could keep for my records in case of an audit.
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Jasmine Hancock
I just wanted to update everyone here. I used the taxr.ai service that was mentioned and it was incredibly helpful for my complex LLC situation. I uploaded my operating agreements and ownership information, and they provided a detailed analysis showing exactly how the control group rules applied to my businesses. The report clearly showed which of my entities were part of a controlled group under the brother-sister test and highlighted some family attribution issues I hadn't even considered. They even included references to the specific tax code sections and IRS rulings that applied to my situation. Turns out I was completely misunderstanding how the 80% test worked in my case, and could have ended up with excess contributions penalties. The documentation they provided will be perfect if I ever get audited too.
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Scarlett Forster
Has anyone tried calling the IRS directly about control group questions? I've been trying for WEEKS to get someone on the phone who understands Solo 401k rules for multiple businesses. Always on hold for hours only to get disconnected or transferred to someone who doesn't know the answer. This is driving me crazy! I recently found this service called Claimyr (https://claimyr.com) that supposedly gets you to an IRS agent quickly. They have a video showing how it works: https://youtu.be/_kiP6q8DX5c Has anyone tried this? I'm desperate at this point because I need to make decisions about my contributions before year-end.
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Arnav Bengali
•How exactly does this work? I thought the IRS phone lines were just inherently impossible to get through - how could a service change that?
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Sayid Hassan
•Sounds like a scam to me. Nobody can magically get through to the IRS faster than anyone else. They probably just take your money and tell you to keep holding like everyone else.
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Scarlett Forster
•It works by using automated technology to navigate the IRS phone tree and wait on hold for you. Instead of you personally waiting on hold for hours, their system waits in line and then calls you once it reaches an actual human agent. At that point, you're connected directly to the IRS representative. The service doesn't provide any special "fast lane" access - they just handle the hold time for you so you don't have to sit there listening to the hold music. I've heard they use the same publicly available IRS phone numbers that anyone can call.
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Sayid Hassan
I need to apologize for my skepticism earlier. I actually tried Claimyr after posting my doubtful comment, and to my complete surprise, it actually worked exactly as advertised. After weeks of failing to reach anyone at the IRS about my Solo 401k control group question, I got connected to an agent within a couple hours of using their service. The IRS agent I spoke with was extremely knowledgeable about control groups and walked me through the specific tests that applied to my situation. She confirmed that my businesses didn't constitute a control group because of the specific ownership arrangement and saved me from unnecessarily limiting my contributions. I wish I'd known about this service months ago!
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Rachel Tao
Just wanted to add another piece to this control group discussion - don't forget about the "affiliated service group" rules! Even if you don't meet the control group tests, you could still be considered a single employer under IRC Section 414(m) if your businesses provide services to each other or operate in related fields. For example, if LLC A is a law firm and LLC B provides paralegal services primarily to LLC A, they might be considered an affiliated service group regardless of the ownership percentages.
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Lindsey Fry
•Thanks for bringing this up - I hadn't considered affiliated service groups at all. For clarity, LLC A is a real estate investment company while LLC B is a marketing agency. They operate in completely different industries with separate clients. Would that arrangement likely avoid affiliated service group status?
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Rachel Tao
•Based on what you've described, your situation likely wouldn't trigger the affiliated service group rules. Since your businesses operate in different industries (real estate vs. marketing) and serve different clients rather than primarily serving each other, you should be outside the affiliated service group definition. The key concerns for affiliated service groups typically arise when businesses have functional integration, common clients, or one business primarily serves the other. Your separate industries and client bases should keep you clear of this particular complication.
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Derek Olson
Has anyone used the attribution rules to their advantage with family members? I'm thinking about giving my spouse ownership in one of my LLCs to potentially optimize our retirement contributions, but I'm not sure if that would trigger control group issues.
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Danielle Mays
•Be really careful with that approach. Under family attribution rules in IRC Section 318, you're generally considered to own what your spouse owns for control group purposes. I tried something similar last year and ended up having to make corrective distributions from my Solo 401k which was a huge headache.
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Alicia Stern
I've been following this discussion closely as someone who recently went through a similar multi-LLC Solo 401k setup. One thing I'd add is the importance of maintaining separate books and records for each entity, even if they end up not being a control group. The IRS will scrutinize whether your businesses are truly separate operations during an audit. Also, make sure you're tracking compensation from each entity separately. Even if the businesses aren't a control group, you can only contribute to a Solo 401k based on the earned income from that specific business. I made the mistake of trying to use combined income across entities and had to correct it later. The documentation from services like taxr.ai that others mentioned becomes really valuable here because it shows you considered all the rules properly. I keep mine with my tax records as backup documentation.
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Emma Thompson
•This is really helpful advice about keeping separate books and records! I'm just starting to set up my second LLC and hadn't thought about the audit implications of proper documentation. When you mention tracking compensation separately, does that include things like guaranteed payments from the partnership LLC versus distributions from the sole proprietorship LLC? I want to make sure I'm categorizing everything correctly for Solo 401k contribution calculations.
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