Solo 401k for independent contractor

BACKGROUD & QUESTION: I have one business that I own with multiple employees (S Corp) and we don’t offer a retirement plan.  I am going to start part time work in a separate company and be paid as an independent contractor (sole proprietor).  The first business is owned by me and the second business that I will be working for is not.  As an independent contractor, can I put the income earned from the second business away in a 401k plan as a self-employed individual or a SEP IRA without any consequence to the first business?  The first and second businesses do not share employees or anything and just want to make sure that common law principles with the IRS don’t prohibit this.

ANSWER:  Based on the information provided, you should qualify to set up a solo 401k plan.

Reason being, pursuant to IRS Pub. 560 independent contractors fall under the self-employed umbrella for solo 401k qualifying purpose. What’s more, the part-time business that you will be employed as an independent contractor is not controlled by you in any capacity. Therefore, the controlled group rules do not come into play.

Thank you.


Samir in New York

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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