Choosing a business to adopt your Solo 401k
As an employer-sponsored plan, the Solo 401k requires an adopting business. The adopting business must represent your self-employment.
If you have more than one self-employment business that you own, consider the following when choosing which self-employment business will adopt the plan.
Adopting business can be any entity type
The Solo 401k can be adopted by a sole proprietorship, LLC, corporation, etc. You do not have to have an established LLC or corporation to adopt the Solo 401k.
Adopting business must not have any full-time employees, besides yourself and potentially, your spouse
As an owner-only plan, the Solo 401k is designed for a self-employment business that does not have any full-time employees, besides the owner and the owner's spouse.
- Part-time employees (W-2 employees who work less than 500 hours/year) do not affect Solo 401k eligibility
- Independent contractors (workers who receive a 1099 instead of a W-2) do not affect Solo 401k eligibility
- Other business owners who work for the company (such as your spouse) do not affect your Solo 401k eligibility and can also participate in the plan
Employees and your Solo 401k
Contributions to the Solo 401k are made from your compensation from the adopting business
Adopting your Solo 401k plan with the business that provides you with the largest amount of earned income will maximize the contributions you can make to the plan.
Active vs. passive income
Defining compensation
Contributions Guide