I am a general partner of an LLC with three members. The other two members are limited partners and are not actively involved in the LLC. When calculating SEP-IRA contributions TurboTax Business says that the two limited partners do not qualify. However, I believe that a solo 401(k) would be a better option for me. Would the two limited/inactive partners also not qualify for the solo 401(k)? Would I be able to make employer contributions to just myself as the only general/active partner of the LLC? How would I record this in TurboTax Business?
Yes, as long as self-employment earnings are reported to you on Schedule K-1 Line 14a, you may contribute to a Solo 401K Plan. These contributions are considered Employee Benefits and entered as a Business Expense in TurboTax Business.
A Solo 401(k) plan covers a business owner with no employees, or that person and his or her spouse. These plans have the same rules and requirements as any other 401(k) plan. Unless one of your partners is your spouse, they would not qualify to participate.
Contribution limits in a one-participant 401(k) plan
The business owner wears two hats in a 401(k) plan: employee and employer. Contributions can be made to the plan in both capacities. The owner can contribute both:
Total contributions to a participant’s account, not counting catch-up contributions for those age 50 and over, cannot exceed $61,000 for 2022 ($57,000 for 2020; $58,000 for 2021).
Additional info: One Participant 401k Plans | Internal Revenue Service