You and your spouse can both open in an Solo 401k, but there can be no common-law, full-time employees in the business. Employees who work fewer than 1,000 hours each year can be excluded from participating in the Solo 401k.
It’s important to note that only a spouse, who is receiving income from the business or a business partner is allowed to participate. In other words, both a business partner and a spouse (if they are two different people) cannot participate in an Individual 401k (Solo 401k).
What type of business must I own to qualify for Solo 401k?
Your business has to satisfy the following:
- Self-employed in a business without any common-law, full-time employees,
- You have part-time employees who work less than 1,000 hours per year
- You’re trying to put away as much as possible for retirement!
Company types that can adopt a Solo 401k:
Fortunately, any type of business entity is eligible to establish an Individual 401k (Solo 401k), including the following:
- Sole proprietorships
- Corporations (including both sub-chapter S and C corporations)
- Limited Liability Companies, which generally are treated for federal tax purposes as partnerships.
- Family Businesses