Solo 401k plans, also known as individual 401ks, are reserved for self employed business owners and professionals. The sponsoring business can be a sole proprietoship, a partnership, an LLC or a corporation. Individual 401k law allows most types of businesses to set up a Solo 401k plan, as long as there is no full time employee aside from the owner and the spouse.
As often seen in business, however, the entity can change from one business form to another. The owner may feel the need to change the business type to accommodate business expansion or adjust the tax filing status. The question is, how would this change affect the Solo 401k plan? Many business owners are reluctant to do so as they assume that this will disrupt their investments or require a new plan. However, Individual 401k law allows such changes to be made without any interruption to the plan.
Watch this Solo 401k Quick Tip video to learn more about what changes are needed when the Solo 401k sponsoring business changes:
Individual 401k Law: What Happens When the Sponsoring Business Changes
The Solo 401k can be sponsored by a sole proprietorship, LLC, or corporation that does not have any full time employees. According to Individual 401k law, if the sponsoring business changes later, let’s say from a sole proprietorship to an LLC, it will still be eligible to sponsor the plan. As the plan owner, you will need to request a restatement for your plan. In this restatement, the adopting employer will be changed to the new LLC, instead of the previous sole proprietorship. All other plan information should remain the same. There will be no interruption to the plan contributions or investments.