Can a Single Member LLC Have a Solo 401(k)?

Yes, a single-member LLC can have a Solo 401(k), and for a self-employed owner it is usually the most generous retirement plan available. Because you count as both the employee and the employer, you can stack two contributions in the same year, up to a combined $72,000 for 2026.¹ The IRS calls it a one-participant 401(k), and it is a standard 401(k) that happens to cover only the owner, or the owner plus a spouse.² The catch is a strict headcount rule and a few compliance traps unique to being your own plan trustee.

Who Qualifies

Your LLC has to be a legitimate for-profit business, and you must have earned income from work you personally perform for it. Passive investment income alone does not count.²

The defining restriction is employees. If your LLC hires a worker who logs more than 1,000 hours in a 12-month period, that person generally has to be offered access to the plan, which strips away the one-participant status and pulls you into the full compliance regime for multi-employee 401(k) plans, including nondiscrimination testing.³ Under the SECURE 2.0 Act, for plan years after 2024, part-time workers who complete at least 500 hours in two consecutive years may also qualify for eligibility, even without hitting 1,000 hours in any single year. A modest part-time hire can eventually create an obligation.

A spouse who works for the LLC is the one exception. Your spouse can participate in the plan at the same contribution limits, effectively doubling the household’s retirement savings capacity.

The Controlled Group Trap

If you own a majority stake in another business that has employees, the IRS may treat both entities as a single employer under the controlled group rules of Section 414.⁴ The employees of the other business then count against your LLC’s headcount for plan purposes. Owners with more than one business should sort this out before setting up the plan, because the classification can surface years later in an audit and retroactively disqualify it.

2026 Contribution Limits

The plan’s power comes from stacking two types of contributions. As the employee, you can defer up to $24,500 of your compensation for 2026.⁵ As the employer, you can add a profit-sharing contribution on top. The combined total cannot exceed $72,000 for 2026.¹

If you are 50 or older, the standard catch-up adds another $8,000 for 2026.¹ A higher “super catch-up” of $11,250 applies if you are between 60 and 63, a provision added by SECURE 2.0.⁵ A 62-year-old owner could theoretically shelter up to $83,250 in a single year.

Employer Contribution Math for Disregarded Entities

The employer profit-sharing piece is capped at 25% of compensation. For a W-2 employee of an S-corp, “compensation” is the salary on the W-2. If your single-member LLC is taxed as a sole proprietorship (a disregarded entity), the math is circular: your plan compensation is net self-employment earnings, minus half of your self-employment tax, minus the contribution itself.⁶

Setting Up the Plan

The plan must be established by December 31 of the tax year for which you want to claim contributions. You do not have to fund it by that date, but the plan documents must be signed and in place. Miss that deadline and you cannot make contributions for that year.

Get Two EINs

You need two Employer Identification Numbers. One is for the LLC itself, if you don’t already have one. The second is a separate EIN for the 401(k) plan trust. That trust EIN is what you use to open the trust’s bank or brokerage account, and it lets the IRS track plan assets separately from your business.⁸ Both are free through the IRS website. When applying for the plan trust EIN, select “Employer Plan (401k, Money Purchase Plan, etc.)” as the entity type.⁹

Sign the Adoption Agreement

The adoption agreement is the legal document that creates the plan. Most brokerages that offer Solo 401(k) accounts provide a pre-approved version. It names your LLC as the plan sponsor, names you as the plan trustee, and spells out the features: whether Roth contributions are allowed, whether participant loans are permitted, what the plan year is (almost always the calendar year), and how contributions vest. You sign it as the LLC’s representative. Keep the document permanently. If the IRS asks to see it and you cannot produce it, the plan’s tax-qualified status is at risk.

Fund the Account

Once the custodian processes your application and issues a trust account number, the plan becomes active with your first contribution. Designate each deposit clearly as either an employee deferral or an employer profit-sharing contribution. The distinction matters for tax reporting and for keeping each type within its own separate limit.

When You Actually Have to Deposit the Money

Employee elective deferrals for a given tax year must be made by December 31 of that year. Employer profit-sharing contributions can wait until your tax filing deadline, including extensions. For an LLC filing on Schedule C, that means April 15 of the following year, or October 15 with a timely extension. If your LLC is taxed as an S-corporation, the business return deadline is March 15, or September 15 with an extension. That flexibility lets you wait until you know your final income before committing to an employer contribution amount.

Borrowing From Your Plan

If your adoption agreement permits loans, you can borrow from the Solo 401(k) without triggering taxes or penalties. The maximum is the lesser of $50,000 or 50% of your vested balance. If half your balance is under $10,000, you can borrow up to $10,000.¹⁰

Repayment must happen within five years through substantially level payments made at least quarterly. A longer repayment window is allowed if you use the loan to buy your primary home.¹¹ Miss a payment or fail to repay on time, and the outstanding balance is treated as a taxable distribution, complete with the 10% early withdrawal penalty if you are under 59½.

Prohibited Transactions

Because you are both the plan trustee and the participant, the line between personal benefit and plan activity is easy to cross by accident. The IRS prohibits any transaction that uses plan assets for your own benefit outside the plan’s terms. Specific examples include selling or leasing property between yourself and the plan, lending plan money to yourself outside a formal participant loan, and using plan funds to pay personal expenses.¹²

The consequences are severe. A prohibited transaction can disqualify the entire plan, meaning the full balance becomes taxable in the year of the violation. The most common ways Solo 401(k) owners stumble into it: investing plan assets in property they personally use, or lending plan funds to a business they own. Keep plan assets in a dedicated trust account and treat them as belonging to someone else.

Annual Reporting Once You Cross $250,000

Solo 401(k) plans with less than $250,000 in assets at year-end are generally exempt from annual IRS filings. Once total assets cross that threshold, you have to file Form 5500-EZ each year.² The form reports total assets, liabilities, and any outstanding participant loans.

The filing deadline is July 31 for calendar-year plans, the last day of the seventh month after the plan year ends.² The late-filing penalty is $250 per day, up to $150,000 per return.¹³ The IRS offers a penalty relief program for late filers, but counting on relief after the fact is a gamble. Check your plan balance every December, and put July 31 on the calendar the year you first cross $250,000. A final-year return may also be required when you terminate the plan, regardless of the balance at that point.

1
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted for Changes in Cost-of-Living
2
Internal Revenue Service. One-Participant 401k Plans
3
Internal Revenue Service. Retirement Plans for Self-Employed People
4
Office of the Law Revision Counsel. 26 USC 414 – Definitions and Special Rules
5
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
6
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
8
Internal Revenue Service. Get an Employer Identification Number
9
Internal Revenue Service. Instructions for Form SS-4 – Application for Employer Identification Number
10
Internal Revenue Service. Retirement Topics – Plan Loans
11
Internal Revenue Service. 401(k) Plan Fix-It Guide – Participant Loans
12
Internal Revenue Service. Retirement Topics – Prohibited Transactions
13
Internal Revenue Service. Penalty Relief Program for Form 5500-EZ Late Filers