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Can a Family Business Adopt a Solo 401K Plan?

The Solo 401K Plan, also known as the Individual 401K, Self Directed 401K, and Self-Employed 401K Plan, is a cost effective 401(k)/profit sharing plan that was designed specifically for the self-employed or small business owners. The Solo 401K Plan offers a number of significant benefits that are not available through traditional small business retirement plans, such as a SEP IRA or SIMPLE IRA.

The Solo 401K Plan was designed specifically for owner-only businesses and small businesses that can exclude certain employees from coverage. The Solo 401K has many of the same advantages that has made the conventional 401(k) qualified plan such a popular retirement plan. The Solo 401K Plan is primarily designed to maximize contributions, but be much less complex and less administratively burdensome and costly to maintain than a conventional 401K Plan.

A family business is a type of a business arrangement that may qualify for “owner-only coverage”. As long as the employee other than the business owner is a spouse, the plan automatically qualifies for owner-only coverage because the spouse generally is considered the owner of the business. Any type of business entity is eligible to establish an a Solo 401K Plan, including sole proprietors, LLC, partnerships, C Corporations, as well as S Corporations.

With a Solo 401K Plan, the owner(s) of a family business can benefit from all the advantages of a conventional 401K plan while being exempt from most of the costly administrative requirements associated with traditional 401(k) Plans.

Using a Solo 401K Plan, a family business owner would have the opportunity to make high contribution limits (up to $54,500) as well as borrow up to $50,000 for any purpose. In addition, the family business owner can make traditional as well as non-traditional investments such as real estate tax-free and without custodian consent. Moreover, the Solo 401K Plan can be opened at any local bank and as trustee a plan investment is as simple as writing a check.

To learn more about the advantages of establishing a Solo 401K Plan, please contact a 401K expert at 800-472-0646 or visit

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Posted in Solo 401(k)

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