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Home/Business/Solo 401(k) for Self-Employed LLC Owners: Limits and Setup
Business owner reviewing a solo 401(k) for self-employed LLC owners with retirement paperwork, a laptop and a calculator on a tidy desk
Business

Solo 401(k) for Self-Employed LLC Owners: Limits and Setup

By admin
November 10, 2026 5 Min Read
Comments Off on Solo 401(k) for Self-Employed LLC Owners: Limits and Setup

No employer means no workplace pension and no company 401(k) — but it does not mean weak retirement options. A solo 401(k) for self-employed LLC owners is the same 401(k) employees get, trimmed down for a business of one. Because you wear both hats, worker and boss, you can contribute on both sides of the plan, and in 2026 the two sides add up to far more than an IRA allows. This guide covers who qualifies, the exact 2026 limits, a worked example on $100,000 of profit, the deadlines that trip people up, and how to open the plan.

Table of Contents

  • Who can open a solo 401(k)
  • Solo 401(k) for self-employed LLC owners: the 2026 limits
  • A worked example on $100,000 of profit
  • Deadlines you cannot miss
  • How to open one, step by step
  • Frequently asked questions
    • Can I have a solo 401(k) if I also have a 401(k) at a day job?
    • What happens if I hire a full-time employee later?
    • Can my spouse contribute too?
    • Is a solo 401(k) better than a SEP IRA?

Who can open a solo 401(k)

The IRS calls it a one-participant 401(k). It covers a business owner with no employees, or the owner plus a spouse who works in the business. Your LLC qualifies whether it is taxed by default or has elected S corp status — see our guide to LLC taxes for how those setups differ, and single vs multi-member LLC if you have a co-owner.

The hard line is staff. Hire a full-time employee who is not your spouse and the plan no longer counts as a one-participant plan; you would need a regular 401(k) with testing and higher costs. That is one reason to think ahead using our guide to hiring your first employee as an LLC. A spouse on the books is the exception, and a useful one: each spouse gets their own set of limits, which can double what the household puts away.

Solo 401(k) for self-employed LLC owners: the 2026 limits

You contribute in two roles.

As the employee: your elective deferral can be up to $24,500 in 2026, or 100% of your pay from the business if that is less. Age 50 or over? Add a catch-up contribution of $8,000, taking the deferral to $32,500. Ages 60 to 63 get a bigger catch-up of $11,250 under the SECURE 2.0 rules.

As the employer: the business can add a profit-sharing contribution of up to 25% of compensation. For an LLC taxed as an S corp, compensation is your W-2 salary. For a default-taxed LLC, it is your net self-employment income, and after the way the IRS maths works out (the contribution itself reduces the base) the practical rate is about 20% of profit after deducting half your self-employment tax.

Combined cap: employee plus employer money cannot pass $72,000 for 2026, or $80,000 if you are 50 or over with the catch-up. Only your first $360,000 of earnings counts. Many providers also offer a Roth solo 401(k) option, where the employee side goes in after tax and comes out tax-free in retirement.

A worked example on $100,000 of profit

Say your single-member LLC nets $100,000 in 2026 and you are under 50.

  • Self-employment tax comes to about $14,130, and half of it ($7,065) comes off your profit, leaving net self-employment income of about $92,935 for plan purposes.
  • Employer side: about 20% of $92,935 is roughly $18,587.
  • Employee side: the full $24,500 deferral.
  • Total into the plan: about $43,087 for the year.

Compare that with a SEP IRA on the same profit, which has no employee side at all — you would be limited to the same $18,587 or so. That gap is the whole reason the solo 401(k) for self-employed LLC owners wins at small-business income levels. At lower profits the gap is wider still: on $50,000 of profit a SEP IRA holds only about $9,300, while the solo plan can take the $24,500 deferral plus about $9,300 of employer money, roughly $33,800 in total. At very high profits both plans run into the same $72,000 ceiling.

Deadlines you cannot miss

  • Open the plan by December 31, 2026 if you want to make employee deferrals for 2026. This is the deadline owners miss most often — a plan opened in January cannot take a 2026 deferral from a default-taxed LLC.
  • Employee deferrals: if your LLC is taxed as an S corp, deferrals must come out of payroll during the year, so the plan has to exist before your last paycheck. How you take money out matters here — see how to pay yourself from an LLC and our LLC vs S corp comparison.
  • Employer contributions are more forgiving: you can fund them up to your tax filing deadline, including extensions, so as late as October 15, 2027 for many owners.
  • Form 5500-EZ: once plan assets pass $250,000 at year end, you file this short annual form. Below that, there is no yearly filing.

How to open one, step by step

  1. Get an EIN for your LLC if you do not already have one — providers ask for it on the paperwork.
  2. Pick a provider. The big brokerages offer free solo 401(k) plans with index fund investing; specialist firms charge fees but add features such as Roth accounts, loans, and checkbook control.
  3. Fill in the plan adoption agreement and open the accounts. It is mostly one form, and it must be signed by December 31 for the current year.
  4. Fund it from your business bank account, and keep a note of what is employee money and what is employer money — your tax return treats them differently.
  5. File your return claiming the deduction. Pre-tax contributions cut your taxable income for the year, which is the immediate reward.

Before you sign up, read the IRS overview of retirement plans for self-employed people so you can compare the solo 401(k) with a SEP IRA and a SIMPLE IRA on the official rules.

Frequently asked questions

Can I have a solo 401(k) if I also have a 401(k) at a day job?

Yes, but the $24,500 employee deferral limit is shared across both plans. The employer side of your solo plan is separate, so you can still add profit-sharing money from your LLC income.

What happens if I hire a full-time employee later?

The plan stops being a one-participant plan. You would need to move to a regular 401(k) with nondiscrimination testing and wider eligibility, or wind the solo plan down. Plan for this before you hire.

Can my spouse contribute too?

Yes. If your spouse works in the business and is paid from it, they get their own employee deferral and employer contribution, which can roughly double the household total.

Is a solo 401(k) better than a SEP IRA?

At most small-business incomes, yes, because the $24,500 employee deferral sits on top of the employer contribution, while a SEP IRA only has the employer side. The SEP is simpler and can be opened later in the year, which is its main advantage.

Disclaimer: this article is general information only and is not tax or financial advice. Contribution limits depend on your exact business income and tax setup — run your numbers with a qualified tax professional or use the worksheets in IRS Publication 560 before you fund the plan.

Tags:

LLCRetirementSelf-EmployedSmall BusinessSolo 401(k)USA
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