Yes, a partnership can have a solo 401(k). Federal tax law treats the partnership as the employer and each working partner as an employee of that employer, so the partnership can adopt a one-participant 401(k) covering the partners (and their spouses, if they work in the business) with no outside staff on the plan. The structure gives each partner access to both employee salary deferrals and employer profit-sharing contributions inside a single plan.
Why the Partnership Qualifies as the Employer
Internal Revenue Code Section 401(c)(4) treats a partnership as the employer of each partner who qualifies as a self-employed individual, meaning the partner’s personal services are a material income-producing factor in the business.1Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans The partnership itself adopts the plan, names itself sponsor, and establishes the trust that holds plan assets.
Because the partners are treated as employees for retirement-plan purposes, each one who provides services and receives earned income reported on a Schedule K-1 can make elective deferrals and receive employer contributions. A partner’s spouse who works in the business can participate too without pushing the plan out of one-participant status.2Internal Revenue Service. One-Participant 401(k) Plans
What Ends Solo Eligibility
The plan stays a solo 401(k) only while the partnership has no common-law employees other than partners and their spouses. Hire someone from outside that circle and the simplified one-participant treatment is at risk. Under standard 401(k) eligibility rules, a plan can require one year of service, defined as a 12-month period with at least 1,000 hours, before an employee becomes eligible. If a non-partner employee crosses that threshold, the partnership must either bring them into the plan (converting it to a regular 401(k) subject to nondiscrimination testing) or face plan disqualification.
The 500-Hour Rule Starting in 2025
For plan years beginning on or after January 1, 2025, SECURE 2.0 requires plans to let long-term part-time workers make elective deferrals once they log at least 500 hours in each of two consecutive 12-month periods and meet the plan’s minimum age requirement.3Federal Register. Long-Term, Part-Time Employee Rules for Cash or Deferred Arrangements Under Section 401(k) A partnership that uses occasional part-time help can lose solo status faster than under the old 1,000-hour standard. Genuine independent contractors are outside these hour thresholds, but the worker has to actually meet IRS classification rules for contractor status.
Controlled Groups Across Multiple Businesses
Partners who own interests in other businesses need to check the controlled-group rules under IRC Sections 414(b) and 414(c). When two or more businesses share enough common ownership, the IRS treats them as one employer for retirement-plan purposes, and employees of the related business count toward the solo plan’s eligibility testing.4Office of the Law Revision Counsel. 26 USC 414 – Definitions and Special Rules The two common structures are parent-subsidiary (one business owns 80% or more of another) and brother-sister (the same five or fewer individuals own at least 80% of each business with combined identical ownership above 50%). If your partnership sits in either bucket, employees of the related company are aggregated when testing whether the plan still qualifies.
What Each Partner Can Contribute in 2026
Solo 401(k) contributions come from two sides: the partner’s elective deferral and the partnership’s employer contribution. The math for self-employed partners is not the same as for W-2 employees.
Elective Deferrals
For 2026, each partner can defer up to $24,500 of earned income on a pre-tax or Roth basis. Partners aged 50 and older add a catch-up contribution of $8,000, for a maximum deferral of $32,500. Partners aged 60 through 63 get a larger SECURE 2.0 catch-up of up to $11,250, bringing the maximum deferral to $35,750.5Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
Employer Profit-Sharing Contributions
The partnership can also make a non-elective profit-sharing contribution of up to 25% of each partner’s adjusted net earned income. To find that base, start with the partner’s Schedule K-1 net self-employment earnings, subtract the deductible half of self-employment tax, and then subtract the elective deferral. The 25% cap applies to what’s left.2Internal Revenue Service. One-Participant 401(k) Plans
Overall Cap
Deferrals plus employer contributions cannot exceed $72,000 for 2026, not counting catch-up amounts. With the age-50 catch-up, the effective ceiling is $80,000; with the age 60–63 super catch-up, it reaches $83,250. A partner’s actual earned income is a separate ceiling, so a partner whose adjusted net earnings fall below these caps can only contribute up to what they actually earned.6Internal Revenue Service. COLA Increases for Dollar Limitations on Benefits and Contributions
Roth Contributions
A solo 401(k) can include a designated Roth account. Roth deferrals are included in current taxable income rather than deducted, and qualified withdrawals come out tax-free later. Pre-tax and Roth deferrals share the same $24,500 annual limit; they don’t stack.7Internal Revenue Service. Retirement Plans FAQs on Designated Roth Accounts SECURE 2.0 also allows plans to offer Roth employer matching or non-elective contributions, which must vest immediately. Adding that feature requires updating the plan document.
Starting in 2026, catch-up contributions must be designated as Roth for any participant whose wages from the plan sponsor in the prior year exceeded $150,000. The threshold is based on FICA wages reported on a W-2. Because partners take self-employment income rather than W-2 wages, how this rule applies to partnerships is not fully settled, and the IRS has not yet issued final guidance addressing self-employed individuals under the provision.5Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 Partners earning above $150,000 should talk to a tax advisor about treating catch-up contributions as Roth in the meantime.
Setting the Plan Up
Get a Separate EIN
The partnership needs a separate Employer Identification Number for the retirement plan trust, distinct from the business EIN. File Form SS-4 and check the “Created a pension plan” box on Line 10. This EIN is used only for plan-related tax reporting.8Internal Revenue Service. Instructions for Form SS-4 (12/2025)
Adopt a Plan Document
The partnership signs an adoption agreement laying out contribution formulas, vesting, loan provisions, and the plan year. Most brokerages offer a pre-approved prototype plan document at no cost. Partnerships that want to invest in real estate or other alternative assets may need a custom document from a third-party administrator, which typically costs several hundred dollars for setup plus an annual maintenance fee.
Deadlines
The plan must be formally adopted by December 31 of the year you want contributions to count for. Elective deferrals for self-employed partners are generally designated by the end of the tax year. Employer profit-sharing contributions can be deposited as late as the partnership’s tax-filing deadline including extensions, typically March 15 for a calendar-year partnership, or September 15 with an extension. Each participating partner links a sub-account to the master plan using their Social Security number.
Ongoing Rules Partners Should Know
Prohibited Transactions
Partners who direct their own plan investments act as plan fiduciaries, and certain transactions between the plan and the partners or their family members are off limits. That includes selling property to the plan, lending plan money to yourself outside the formal plan-loan rules, and using plan assets for personal benefit.9Internal Revenue Service. Retirement Topics – Prohibited Transactions A prohibited transaction can disqualify the entire plan, in which case the IRS treats all plan assets as distributed to participants on the first day of the year the violation occurred, with income tax and potentially the 10% early-withdrawal penalty applying to the full balance.
RMDs at 73, No Still-Working Exception
Partners must begin required minimum distributions in the year they turn 73. Because active partners typically own more than 5% of the business, they cannot use the still-working delay that lets some rank-and-file employees postpone RMDs past 73. The 5%-owner rule requires distributions to begin at 73 whether the partner is still working or not.10Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Form 5500-EZ
Solo 401(k) plans skip most of the annual filings that larger plans face, with one asset threshold to watch. When the combined assets of all one-participant plans maintained by the partnership exceed $250,000 at the end of any plan year, the partnership must file Form 5500-EZ for each of those plans.11Internal Revenue Service. Instructions for Form 5500-EZ (2025) The deadline is the last day of the seventh month after the plan year ends, so July 31 for a calendar-year plan. A final 5500-EZ is required when the plan terminates, regardless of asset level.12Internal Revenue Service. Financial Advisors: Are Assets in Your Client’s 1-Participant Plans More Than $250,000? Missing the deadline carries a penalty of $250 per day up to $150,000 per plan year, though the IRS offers a penalty-relief program for late filers who voluntarily come into compliance.