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 employee 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 $49,000 each ($54,500 each if both are age 50+) in 2009 and 2010. Therefore, given sufficient income a husband and wife may be able to contribute a total of $98,000 or $109,000 (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.

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Disclosures:

*  The information on this page is for informational purposes only and does not constitute, and should not be construed as, professional, legal or tax advice. To determine your individual tax situation and specific needs, please consult a professional tax advisor.

* Information contained in these sections merely highlight some benefits. There are risks involved with all investments that could include tax penalties and risk/loss of principal.