Small Business 401(k) Questions Answered

Yes — sole proprietors, single-member LLCs, and S corporation owners with no employees other than themselves may qualify for the SECURE Act startup tax credit when establishing a new 401(k) or other qualified retirement plan. Eligibility depends on plan type and prior plan history. We'll review your situation and determine exactly what applies to you.

The SECURE 2.0 Act and related retirement-plan tax credits may significantly reduce the cost of establishing a new plan. Eligible small employers may qualify for a startup-cost credit of up to $5,000 per year for three years. Certain employers may also qualify for a separate employer-contribution credit of up to $1,000 per eligible employee, which may be available for up to five years and generally phases down over that period. In addition, eligible employers that include automatic enrollment may qualify for a $500 annual credit for three years.

If you haven't reviewed your plan in the past two years, the answer is almost certainly yes. Plan costs, investment options, and administrative fees vary widely between providers. We regularly find businesses paying more than necessary — and in some cases, a plan redesign or provider switch can lower ongoing costs while improving benefits for you and your employees.

Costs vary depending on plan type, provider, and number of participants. Some providers charge flat annual fees; others charge per-participant or as a percentage of assets. For very small businesses, a Solo 401(k) can be extremely low-cost. We work with providers that integrate with 500+ payroll systems and offer competitive pricing — and we'll help you compare your options so you're not overpaying.

Yes, with an important distinction: an S corporation owner who receives W-2 wages from the corporation can participate in a Solo 401(k) — but only if the corporation has no other eligible employees. Contributions are based on W-2 compensation, not distributions. This is a common area of confusion, and getting it right matters for both tax compliance and maximizing your contribution limits.

It depends on your business structure, income level, number of employees, and goals. A Solo 401(k) works well for owner-only businesses with high contribution limits. A Safe Harbor 401(k) simplifies compliance for businesses with employees. A SEP-IRA is straightforward but less flexible. A Cash Balance plan can dramatically increase deductible contributions for high-income owners. We'll walk through the options and help you choose the plan that fits your situation — and your tax strategy.