Self-Employed Solo 401k Eligibility FAQ – Do I have to pay myself a w 2 to set up a Solo 401k?
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Self-Employed Solo 401k Eligibility FAQ: I have a single-member LLC. Do I need to pay myself a salary to contribute to a solo 401(k)?
RESPONSE:
Ultimately, in order to be eligible to set up a Solo 401k plan, one has to be reporting earned self-employment income.
Typically, when one’s self-employed business is organized as a single-member LLC taxed as a sole proprietor (i.e. disregarded entity), earned self-employment income is reported on schedule C.
For a self-employed business taxed as an S-corporation, self-employment income is the w-2 wages received from such business taxed as an S-corp.
If a self-employed business that is taxed as a single-member LLC pays the owner a w-2, it would be acceptable for the self-employed individual to make Solo 401k contributions based on such w-2 wages.
