I'm getting a new job starting August 4th. According to the employee manual, it reads as though I can't enroll in their 401K until the 1st of the year.

I currently have like $1300 in a 401K with the old job.

I'm super confused about what I can do with the money. HR gave me a sheet of information about it but it doesn't go over any benefits/consequences of each option.

If I just keep the money in it can I just transfer it to the new 401K in January?

If I pull the money out, it looks like I'm hit with a penalty plus I never paid tax on any of it so I'd be liable for that? It's not much so it wouldn't be the end of the world.

What is the best option here?

You can transfer your current 401k to an ira at a brokerage like Fidelity.

You should have two decent option:
1. You can take the money and roll it over to a Traditional IRA, unfortunately $1,300 would put you with limited fund choices because most funds you can invest it in require at least $3,000.  You could move it to an IRA and also make a contribution ($5,500 maximum limit) for 2014 to get to the $3,000, you won't be contributing to any other retirement account for the rest of the year, so you should have some cash you could do this with.
2. You can leave it where it is and roll it over to your new employer's plan when that account finally opens.

Options you shouldn't consider:
1. Take the money and run.  This will leave you with taxes and penalties to pay in addition to wiping out the tiny retirement account stating you all over again.
2. Leave the money where it is for the long term.  It would either be forgotten or eaten alive by fees for being so small.

I was actually in the same predicate a few days ago. Like yourself, I was a bit limited in what I could invest in since I didn't have the 3k minimum. I called up Vanguard and an investment rep walked me through the process, which was incredible helpful and easy. Put it into a fund that you're eligible for and then move the money into other funds once you have at least the minimum amount.

I had this thread saved in my favorites for a while because I knew I would need it at some point.
What to do with employer sponsered 401K after job ends

I can only speak of Vanguard but you can have a brokerage account inside of an IRA so you can purchase ETFs.  That would get you around the minimum limit that some of the mutual funds have.

Just another option.

Roll the money into an IRA.  DO NOT CASH OUT!

This guy nailed it.  I would suggest waiting the year and rolling your older 401(k) into your new 401(k) plan.  While this is usually allowed, some plan documents will restrict this "Trustee-to-trustee" transfer.  Ask HR at your new firm if they allow this.  The balance is not very large and will likely not do you very much good in an IRA Rollover.  In the meantime, put the funds you would have placed in your 401(k) to the side.  Once you become eligible for your new firm's 401(k), drop the lump sum into the new plan along with your 401(k) rollover. While you will not get the tax benefit it 2014, it will be a larger benefit in 2015.

Thanks everyone! I'll talk to my employer about it here soon and make sure I can transfer it in. If not, I'll go the IRA route.