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It’s easy for a plan to fly solo

by on
in Small Business Tax

Q. I’m starting up a one-person LLC. Can I use a solo 401(k) for this business? H.B.P., New York

Yes. The solo 401(k) plan may be used for virtually any form of wholly owned business such as a C corporation, S corporation, limited liability company (LLC) or sole proprietorship.

Note that the limit for elective deferrals under a solo 401(k) are increasing from $15,500 for 2008 to $16,500 for 2009 ($20,500 to $22,000 for those age 50 or older). Plus, the overall dollar cap on contributions, including employer-matching contributions, is increasing from $46,000 for 2008 to $49,000 for 2009 (higher if you are age 50 or older).

Tip: If you hire an employee for your LLC, he or she will have to be covered under the 401(k) plan.

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