Wow, that's a long question.

I agree that the Solo 401k is a great way for self-employed people to save for retirement. For 2011, the maximum you can contribute to your Solo 401k is $49k. If you're 50 or older, the max is $54.5k.

You can get up to that total by contributing up to $16.5k of "salary deferrals". The remaining $32.5k will come as the "profit sharing" contribution of up to 20% of your net self-employment income.

If your wife is working for your practice, you can put her on payroll. She can then contribute up to $16.5k in salary deferrals, and then the practice will contribute an additional 25% of her gross wages into the plan as a profit sharing contribution. So if she makes $25k from you during the year, you and she together can contribute up to $21.5k into her retirement account.

You can maintain a Solo 401k if the only participants in the plan are you and your spouse. Once you have other employees who work more than 1000 hours per year, you no longer qualify for the Solo 401k, and need to switch to one that allows for employees to participate.

And setting up a second LLC does not allow you to sock away an additional $49k. When businesses have common ownership - 50% or more of two businesses owned by the same person or group of people - they are considered one business for retirement benefit purposes. Othewise, people who make a lot of money would set up dozens of separate businesses, and put away hundreds of thousands of dollars pre-tax into retirement accounts. Plus, the government doesn't want business owners to set up two businesses - one for their employees and one for themselves, and put in generous benefits for the company that they set up for themselves and give crappy benefits to the staff.

Let us know if you have any follow up questions.

Zip Code: 01801

Thank you for that info! I appreciate the attention to detail and my own 'research' was drawing me to the same conclusions so I'm glad I had a clue :)

I have to set up with a local acct soon to get things moving properly ... Was wondering about putting my wife on payroll .... Wasn't sure if it's better for her to be 1099 or W-2 ...

My second business has all 'working staff' in contractor positions (they do pass the sniff test) ...

This depends on what your wife will be doing for your practice. Most likely, you'll need to put her on payroll. Pay her $18k, and she can max out her 401k salary deferrals of $16.5k.

Also, you can have a Solo 401k even if your wife is on payroll of the practice. To maintain a 401k, the only people who work more than 1,000 per year for the practice can be the business owner and his or her spouse.

Zip Code: 01801