How to take loan from 401(k) as owner of S corp and LLC

[Guest alwilkins]

My husband is the primary shareholder of an S Corp, of which I am an employee, and the owner of an LLC, of which I am an officer. Is there any way to set up a 401(k) for either company so that I can take a loan on my account? I will be transferring a substantial amount in from a former employer's 401(k), and would like to have access to it. Are LLC's and S Corps treated differently regarding owner/employees taking loans? Thanks for your help.

[R. Butler]

Plan loans are genrally not available to owner/shareholders of an S-corporation. Probably not allowed with LLC status either, unless the LLC is tretaed as a C-corp.

[Guest]

as the spouse you will be considered the owner by attribution. LLCs are treated as partnerships generally for tax purposes.

However, S-Corp status will not help you as you are considered the owner and for benefit purposes S Corps are treated as partnerships.

In a nutshell you are not able to borrow against the funds

[traveler]

I just wanted to add that the prohibition on loans to owner-employees comes from the prohibited transactions rules of ERISA Section 408(d), and IRC Section 4975(d) and (f)(6). The IRS, at a 1997 Q & A session with the Pension Actuaries indicated that Limited Liability Corporations should be treated as analogous to partnerships, sole proprietors or S corporations for loan purposes, until the IRS specifically addresses the issue.

[Anthony]

Note that this thread is made obsolete by Section 612 of the EGTRRA. https://www.congress.gov/107/plaws/publ16/PLAW-107publ16.htm