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Can I have a solo 401k if I have 1099 employees?
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1 Reply
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Yes, you can have a Solo 401k for your business even if you hire independent contractors (1099 employees). The key eligibility criteria for a Solo 401k are:
You must be self-employed and generate some self-employment income from your business. This can be through a sole proprietorship, partnership, LLC, or corporation.
You cannot have any full-time W-2 employees (working more than 1,000 hours per year) other than yourself and your spouse.
Hiring 1099 independent contractors does not impact your eligibility for a Solo 401k. Independent contractors are not considered employees for Solo 401k purposes.
So in the example given, if you are opening a franchise location and will only pay 2-4 people as 1099 independent contractors with no W-2 employees, you would still be eligible to open and contribute to a Solo 401k for your business.
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