Any business entity is eligible to open and contribute to a solo 401k plan as long as they meet the general solo 401k eligibility rules. An S corporation is also allowed to open a solo 401k, but there’s one additional eligibility rule if it has multiple shareholders.

Here’s everything you need to know about opening a solo 401k plan as an S corporation owner.

What is an S corporation?

An S corporation (which stands for Subchapter S corporation) is a business structure that doesn’t pay federal income tax. Instead, it “passes through” taxable income, credits, deductions, and losses to its shareholders for federal tax purposes. For this reason, it’s referred to as a passthrough corporation and, unlike a C corporation, avoids being double taxed.

Can you open a solo 401k as an S corporation?

Yes, business owners of an S corporation can open a solo 401k. Any business entity is eligible for a solo 401k plan as long as they meet the two general eligibility rules:

  1. Must have some form of self-employment activity.
  2. Must not have any employees other than your spouse.

An S corporation is eligible for a solo 401k as long as it makes any income, and has no employees, including part-time employees who are at least 21 years of age, and have worked over 500 hours per year for 3 consecutive 12-month periods (spouses are okay).

Also read: Can an LLC open a solo 401k?

Does your S corporation have multiple shareholders?

If your S corporation has multiple shareholders, there is one additional eligibility rule: Every owner in the company must own at least 2% of company stock.

As long as every shareholder owns at least 2% of the company, the IRS counts them as a partner in the business and is eligible to open a solo 401k, as long as it doesn’t have any employees.

Solo 401k contribution limits for S corporations

The 2022 contribution limit for a solo 401k is $61,000. If you’ll be at least 50 years old by December 31, 2022, you’re eligible for additional catch-up contributions in the amount of $6,500, bringing your total contribution limit to $67,500.

Employees are able to contribute up to 100% of their income, up to $20,500 ($27,000 if you’re over 50). Employers can contribute up to 25% of their compensation.

For an S corporation, only W-2 wages are considered as compensation. Distributions you receive as a shareholder and reported on your K-1 form, are not considered as compensation. If you mistakenly made contributions based on shareholder distributions, you can correct the mistake following these steps.

When is the solo 401k contribution deadline for an S corporation?

Employee and employer contributions have different deadlines.


Employees have two separate deadlines: an election filing deadline and a funding deadline.

Election filing deadline: You must file your employee contribution elections by December 31, 2022. If you don’t have a solo 401k set up, you must set your account up by this date and file your written elections. You don’t actually need to fund your accounts by this date.

Funding deadline: After filing your elections, you have until the federal tax deadline to actually fund the accounts. The federal tax deadline is April 18, 2023.

An election basically states to the IRS exactly how much you’ll be contributing, and to which accounts you’ll be contributing to. Employees have the option to contribute to a pre-tax traditional solo 401k or a Roth solo 401k. Employers can only contribute to a pre-tax traditional solo 401k.


Employers have until March 15, 2023 to fund their profit sharing contributions. All contributions must be made in pre-tax dollars, and be deposited into a traditional solo 401k account. Employers cannot contribute to a Roth solo 401k.

How to open a solo 401k as an S corporation?

The process for opening a solo 401k is the same for any business entity you have:

  1. Choose your plan provider, making sure that the one you choose offers the full benefits you’re looking for from a solo 401k.
  2. Get an Employer Identification Number. This is a unique number that the IRS uses to identify your business as its own entity separate from you.
  3. Open your solo 401k account with your plan provider. Fill out all required documents, as well as your plan adoption agreement.
  4. Get one more EIN for your solo 401k trust.
  5. Open separate bank and brokerage accounts for your solo 401k trust.
  6. Start investing through your solo 401k accounts.

Each solo 401k plan provider offers different things. Some don’t have a Roth option, some don’t allow alternative investments, some have more complex sign up processes than others, and each one provides different levels of support.

Ocho is a fully-managed solo 401k plan with plan document and establishment services, ongoing administration support, and an integrated investment platform (you don’t need to open your own bank and brokerage accounts).

Set up a new solo 401k in under 10 minutes

Contribute up to $66,000 and invest in any asset class with tax-free compounding.

Anyone who makes money from a business, freelancing, or a side hustle is eligible, as long as you have no employees.