Solo 401k Eligibility

Who Is eligible for a Solo 401k?

You qualify if you are a self employed individual with no full time employees other than a spouse, regardless of whether you are incorporated or unincorporated. Sole proprietors, independent contractors, C corporations, S corporations, partnerships and LLCs qualify. Partnerships that have no full time employees other than the business owners may also qualify for a Solo 401k.

You can establish a Solo 401k only if you have (other than a spouse) no W-2 employees or employ W-2 employees who work less than 1,000 hours per year. Employing independent contractors in your business does not disqualify you from establishing a Solo 401k.

Businesses with a spouse on the payroll can also contribute to the Solo 401k. There would be one Solo 401k for the business with two participants. Provided a business owner and spouse have sufficient income from the business, both may be able to contribute $50,000 each ($55,500 each if both are age 50+) in 2012. Therefore, given sufficient income a husband and wife may be able to contribute a total of $100,000 or $111,000 (if both age 50+).

The deadline for establishing a Solo 401k is December 31st of the year in which you would like to receive the tax deduction or fiscal year end, whichever comes first. A Solo 401k can potentially offer a fantastic tax deduction therefore greatly reducing federal income taxes.

Solo 401k Frequently Asked Questions

Find answers to your questions. Visit our Solo 401k FAQs section.