Solo 401k Eligibility

In order to setup your own Solo 401k, you must meet two basic criteria.  These criteria are rather easy to meet, and allow you ample opportunity to set up your Solo 401k in a way that makes sense to you.

A Solo 401k eligibility requires 2 things:

1. Presence of self employment activity – This can be as a sole proprietor or more formally organized as a Corporation, Partnership, or LLC.  You can be self-employed part time only and still have a full time job and be eligible for a Solo 401k.  In fact, this is how most folks get their Solo 401k started before they leave their full time job.
2. 
   
1. Absence of full time employees – To meet this requirement you cannot have full time employees in a business that you own. Part time employees (those who work under 1000 hours per year) and independent contractors (those who receive a 1099 rather than a W-2 at the end of the year) are okay to employ. Spouses are also exempt from the 1,000 hour policy.
   

Now, one thing to remember is that your “self employment activity” cannot be a hobby.  In order to have proper Solo 401k Eligibility, you must have some sort of revenue.  This doesn’t mean your business needs to be profitable, but you do have to make some sort of money.  Obviously we want you to make more and more money so that you can contribute more and more to your 401k and shield yourself from taxes.  However, the point is that you don’t need to be profitable (just look at all the airlines losing money year after year…they’re still in business- barely, but they are a business).