Eligible Businesses
Solo 401(k)s may be ideal retirement plans for a variety of single-owner businesses, including sole proprietorships, limited liability companies, partnerships and corporations. Candidates for these types of plans include: real estate brokers, sole practitioner CPA firms, consultants, contractors, entrepreneurs, attorneys and tradesmen. While Solo 401(k)s are designed for small-business owners with no full time employees, the following exceptions are permitted:
- Spouses;
- Part-time employees working fewer than 1,000 hours per year;
- Employees with less than one year of service;
- Certain union employees; and,
- Certain non-resident/alien employees.
Business owners should know that once a single full-time employee is added, the plan must be converted to a traditional employee-sponsored 401(k) Plan, which is then subject to ERISA Plan Rules.
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