Self-employed 401k Question Answered – Can I set up a solo 401k if my children work in my business?
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Solo 401k FAQ – Are there any restrictions on paying minor children in my business with regard to establishing a solo 401(k) plan?
RESPONSE:
Good question!
If the children of the Solo 401k who work are in the self-employed business are minors, such children won’t be able to participate in the solo 401k plan but it won’t preclude the Solo 401k owner from establishing/continuing to participate in the Solo 401k.
Once the children of the Solo 401k owner are 21 years of age or older, then it will be like any other self-employed person who has employees working in the business. For example, if a child of the Solo 401k owner is 21 years of age or older and works in the business as a full-time w-2 employee the solo 401k owner will not be able to establish and maintain a solo 401k unless such child becomes at least a 3% or more owner of the company. Once the child is a 3% or more owner of the self-employed business, the child is not just an employee but now a co-owner such that a Solo 401k plan may be established provided that there are no other non-owner/non-spouse full-time w-2 employees.
