You didn't understand, so let me try this part, again:

The 401(k) account only exists because Vanguard would have required proof of a Plan. That Plan document is going to state if this was his Sole Proprietorship or his S Corp as forming (sponsoring) a Plan.

He can put money into Solo 41(k) amount as Sole Proprietorship. He is both an employer and his own employee as the S Corp. You need to find out whose Plan this is, to know whether or which parts were done right and which were done wrong. He might not need to remove any funds, because "employer" can make nonelective contributions.

Read this:

https://www.irs.gov/retirement-plans/one-participant-401k-plans

And you might need expert help for this. You will learn from that mentor.