Solo-K Eligibility

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In general, it is very easy to qualify as self-employed. As long as you have a legitimate business with the intent of generating income/profit, and meet the two following eligibility requirements, you can qualify for a Solo-K:

Part-time or full-time self-employment activities; and,

No presence of any common-law, full-time employees (other than a spouse or business partner).

Who is a common-law employee?

Who is not a common-law employee?

Employees under the age of 21;

Employees who are working less than 1,000 hours per year; and,

Legitimate usage of 1099 independent contractors

It doesn’t take much for your business to sponsor a Solo-K. Whether you are a sole proprietor, LLC, S-Corp, C-Corp or partnership, you are able to sponsor the plan. 

While relatively easy to qualify for a Solo-K by having legitimate self-employment activities, do not subject yourself to potential IRS review by knowingly creating a plan when you do not qualify for it. 

1. You must carry on a trade or business as a sole prop or an independent contractor; 
2. You are a member of a partnership that carries on a trade or business; 
3. You are in business for yourself; 
4. You are running a business with the intent of making a profit; and, 
5. You can operate your business as a part-time business.

Hobbies - A hobby does not qualify for self-employment.

Being an Independent Contractor - Make sure you qualify for being an independent contractor.

1099 Contractors - If you retain the services of an independent contractor, make sure they qualify for an independent contractor vs. being considered your common-law employee!

Spouse - Your spouse can participate in the plan, rollover funds into the plan and make contributions as long as they are a legitimate participant in the business.

Yes, you can. The IRS does not stipulate how many 401(k) plans you can participate in, only that you qualify and comply with contribution limits.

Elective deferrals are capped to the person, regardless of how many plans a person may participate in. In contrast, business profit-sharing contributions are only limited to what each business can contribute to the plan based on participant compensation.