How it works

Self Directed Checkbook 401k Plans for the Self Employed



To qualify for a Solo 401k, there are 2 main eligibility requirements.

1. The presence of self-employment activity

This is often simpler than some people think to accomplish. Self-employment activity doesn’t have to mean that you run an incorporated business with large income or assets as your main occupation. You don’t have to have an LLC or Corporation formed. You don’t need to have a specific minimum amount of earned income either. You can even be employed elsewhere as your main job. We’ve created plenty of Solo 401k plans for people who had a full-time job but also have a side business or work as an independent contractor in some capacity.

2. The absence of any full-time non-owner employees

Regardless of whether or not you are employed by someone else as discussed above, if you employ others in your business or self-employment activity, you need to look closely at just how this is done. The Solo 401k is meant for “solo” business owners, or those who do not have employees that earn a W-2 paycheck, work full time, and are not owners. If any one of those 3 items does not apply to the employees, you may still be eligible for a Solo 401k. For instance, if your staff are independent contractors that legitimately receive a 1099 instead of a W-2, or receive a W-2 but each work fewer than 1,000 hours per year, or the employee you are thinking of is a partner in the business as well, you are most likely still able to create a Solo 401k for yourself.


To create a Solo 401k, you will need a set of specialized documents that:

-Spell out how the 401k plan and trust operate

We create these 401k plan documents as well as a 401k trust that holds the assets of the 401k plan. As the trustee, you are in control of the plan assets.

-Are customized for your business to adopt and for you to participate in

Your business or self-employment activity is the “adopting employer” even if it is just you personally as a sole proprietor. And as the participant in the plan, it’s your funds in the 401k that you get to direct and control.

-Are IRS-compliant, preferably with an IRS determination letter proving that compliance

All of our plans include an IRS determination or IRS opinion letter that shows you (and anyone who may need to check on the plan’s compliance) that the 401k meets IRS guidelines for you to receive all the benefits we’ve laid out here. We think that peace of mind is pretty important and our customers tend to agree.

Discount Solo 401k specializes in creating these documents for customers at a fair price. Call us today to see how we can help you or apply online now.


Once you have your documents from Discount Solo 401k, setting up your new plan is easy and includes the following steps:

Signing your document signature pages

This simple step brings the plan and trust into existence and makes it official.

Setting up a bank account for the 401k trust at the bank of your choice

The bank account will be set up in the name of the 401k trust and as trustee, you are the signing authority on the account. This is what gives you that most sought after checkbook control.


Once your Solo 401k is set up, you have many options for using it:

Transferring in any existing retirement funds, if desired

If you have an existing IRA or 401k from a previous employer, transferring your funds into the new Solo 401k and getting checkbook control of those assets is easy. For more information on what you may be able to rollover into the plan, feel free to give us a call.

Making new contributions to the plan

One of the huge benefits to the Solo 401k is the ability to contribute a large amount of tax-advantaged funds into the plan each year. People are sometimes amazed to learn the contribution limits are roughly 10 times higher than that of an IRA. With our plans, there is a built-in Roth component, so you can make Roth contributions that will grow tax free, traditional contributions that are tax-deductible, or a combination of both. You can even make after-tax (non-Roth) contributions and convert those funds to Roth. This is sometimes referred to as the mega backdoor Roth strategy.

Borrowing funds from the plan via a participant loan

Unlike an IRA, our Solo 401k allows you to take a loan from your retirement account, up to $50,000 per participant. There is no fee for this service, and you don’t have to pay interest to a bank. Interestingly enough, the borrowed funds are not even subject to the prohibited transaction rules that govern these retirement accounts.

Investing the funds into both traditional and alternative assets using checkbook control

Our plans are designed for you to have checkbook control and the flexibility to invest into alternative assets such as real estate, cryptocurrency, notes, precious metals, private companies, etc. On top of that, you can still allocate funds to more traditional assets such as stocks, bonds, and mutual funds if you wish. You’re not trading one set of restrictions for another. You really do get the best of both worlds with this incredibly powerful, fully functional retirement plan.


Call 303-427-4519