Can a Single-Member LLC Have a Solo 401(k)?

If you operate your business as a single-member LLC, you may be wondering:

Can I open a Solo 401(k) for my LLC?

The short answer is yes — absolutely.

In fact, a Solo 401(k) is often one of the most powerful retirement strategies available to self-employed business owners. Let’s break it down clearly so you understand how it works and how to maximize it.

Watch: Learn how a self-employed LLC can open a solo 401k

What Is a Single-Member LLC?

A single-member LLC (Limited Liability Company) is a business entity with one owner (called a “member”).

Key characteristics:

Provides liability protection (separates personal and business assets)
By default, treated as a disregarded entity for federal tax purposes
Income flows through to the owner’s personal tax return (Form 1040)
Business income is typically reported on Schedule C, Line 31

Because the owner earns self-employment income, they are eligible to establish a Solo 401(k) — as long as there are no full-time W-2 employees working 1,000 hours or more per year (other than the owner(s) or their spouse(s) ).

What About a Multi-Member LLC?

A multi-member LLC has two or more owners and is typically taxed as a partnership by default.

In this case:

The LLC files a partnership return.
Each member receives a Schedule K-1.
Solo 401(k) contributions are based on:
- Schedule K-1, Line 14, Code A (Self-Employment Income)

Each member calculates contributions separately based on their own K-1 income.

As long as there are no common-law full-time employees, a multi-member LLC can also establish a Solo 401(k).

Can Both Spouses Participate in the Same Solo 401(k)?

Yes — and this is where things get very powerful.

If both spouses:

Work in the same LLC
Receive compensation from the business
Have self-employment income

Then both can participate in one Solo 401(k) plan sponsored by the LLC.

Each spouse gets:

Their own employee contribution limit
Their own employer contribution calculation
Their own overall annual limit
Their own catch-up contribution (if age 50+)

For 2025:

$70,000 total annual limit per person
Potentially $140,000 combined

For 2026:

$72,000 total annual limit per person
Potentially $144,000 combined

That’s a significant opportunity to accelerate retirement savings.

How LLC Tax Status Affects Solo 401(k) Contributions

An LLC is a legal structure — not a tax classification. It can elect how it wants to be taxed:

Taxed as a Sole Proprietorship (Default for Single-Member LLC)

Income reported on Schedule C
Contributions based on Line 31 (Net Profit)
Must subtract ½ of self-employment tax
Employer contribution = 20% of adjusted net earnings

This structure allows maximum flexibility for contribution timing.

Taxed as a Partnership

Each member receives a Schedule K-1
Contributions based on K-1 Line 14, Code A
Must subtract ½ of self-employment tax
Employer contribution = 20% of adjusted net earnings

Each spouse calculates contributions separately.

Taxed as an S-Corporation

Contributions based on W-2 wages (Box 1)
Employer contribution = 25% of W-2 wages
No reduction for self-employment tax required

This can sometimes allow reaching the annual maximum with less overall income compared to sole proprietorship taxation.

However, W-2 wages must be reasonable compensation.

Contribution Deadlines: Can You Still Contribute for the Prior Year?

Yes — but it depends on entity type and contribution type.

If Taxed as Sole Proprietorship:

You can open a Solo 401(k) in the following year and still make prior-year contributions by:

April 15 (or October 15 if filing extension)
Employee + Employer + After-Tax contributions may still be possible

If Taxed as S-Corp:

Employer contributions may be made by business tax filing deadline (including extension)
Employee contributions must have been elected before year-end

Deadlines vary — so entity structure matters significantly.

How Many Bank or Brokerage Accounts Are Required?

A Solo 401(k) is one plan, but requires separate holding accounts for proper accounting.

One Participant:

You need separate accounts for:

Pre-Tax
Roth
Voluntary After-Tax

Two Participants (Spouses):

Each spouse needs separate accounts for:

Pre-Tax
Roth
Voluntary After-Tax

That means:

3 accounts for one participant
6 accounts for two participants

This ensures:

Clean accounting
Proper IRS reporting
Accurate Roth conversion tracking
Proper loan tracking

Can a Spouse Be a Co-Trustee Without Being a Participant?

Yes.

A spouse does not need earned income to be named co-trustee. They simply cannot make contributions unless they have compensation from the business.

This is common and perfectly acceptable.

Solo 401(k) Loan Feature

Each participant can borrow:

Up to 50% of their vested balance
Maximum of $50,000 per person

If both spouses qualify, they could potentially borrow up to $100,000 combined.

Loan terms:

5 years (general purpose)
Longer term allowed for primary residence
Must repay principal + interest
No credit check
Funds can be used for any purpose

Final Takeaways

✔ Yes, a single-member LLC can absolutely establish a Solo 401(k)
✔ Multi-member LLCs can also qualify
✔ Both spouses can participate in the same plan
✔ Contributions depend on how the LLC is taxed
✔ Separate holding accounts are required
✔ When structured properly, this strategy can significantly increase retirement savings

For self-employed entrepreneurs, consultants, and business owners, the Solo 401(k) remains one of the most powerful retirement tools available.