How To Set Up A Solo 401k Plan

How to Set Up a Solo 401k

Step 1: Choose a plan provider

Step 2: Get an Employer Identification Number (EIN)

Step 3: Fill out an application and plan adoption agreement

Step 4: Get an EIN for your Solo 401k trust

Step 5: Open bank accounts for your Solo 401k trust

Step 6: Fund your Solo 401k

Step 7: Start investing

Let’s take a closer look at each step:

Step 1: Choose a Plan Provider

Every Solo 401k plan provider offers different features. The first step is to find a plan provider that aligns with your needs, especially in terms of flexibility, investment access, and tax treatment.

Key features to look for:

✅ Roth Option: This allows you to make post-tax contributions and enjoy tax-free withdrawals in retirement. It’s a valuable benefit, but not all brokerage-based prototype plans include it.

✅ Rollovers: You can roll over funds from other retirement accounts into your Solo 401k. This is often the fastest way to fund your account—and it doesn’t impact your annual contribution limits.

✅ Built-In Investment Platform: Some providers, like Carry, offer integrated platforms so you don’t have to open separate bank or brokerage accounts manually.

✅ Administrative Support: A good provider may help with plan setup, annual compliance, and IRS filing requirements. Not all providers offer this, but it can save you time and reduce the risk of errors.

📌 Compare free and paid Solo 401k plans here.

A provider with solid support can help you complete the rest of the setup process. If yours doesn’t assist with administration, continue to step 2.

Step 2: Get an Employer Identification Number (EIN)

An Employer Identification Number is a unique nine-digit number that the IRS uses to identify any business or trust.

To set up a Solo 401k, you’ll need two separate EINs:

Why two? Because your Solo 401k trust is legally distinct from both you and your business. The IRS needs to track that trust separately.

How to Get an EIN for Your Business

‍Most business owners already have an EIN registered for their business. If you don’t have one, you can go to the IRS website and apply. It’s free, takes just a few minutes to fill out the application, and approval is instant in most cases.

Step 3: Fill Out an Application and Plan Adoption Agreement

Setting up a Solo 401k requires paperwork, typically a set of documents provided by your plan sponsor. Among these, the Plan Adoption Agreement and the Trust Agreement are the most important.

Some providers may require printed forms to be signed and mailed, while others allow everything to be done online.

📌 With the Carry Solo 401k, you can complete everything online.

Once complete, you can proceed to the next step.

Step 4: Get an EIN for Your Solo 401k Trust

As noted in Step 2, you now need a second EIN, this time for your Solo 401k trust.

The process is similar to the one you followed for your business. The main difference is that the applicant type should be your retirement trust, not a business entity.

📝 Note: Some providers, like Carry, may handle this for you.

Step 5: Open Bank and Brokerage Accounts for Your Solo 401k Trust

Now that your Solo 401k trust has its own EIN, you can open separate financial accounts in its name. These accounts must be kept completely separate from your personal or business funds. Mixing them is a prohibited transaction that can lead to severe IRS penalties.

Open Separate Accounts for Roth and Traditional Funds

If your plan supports both Roth and Traditional contributions, you’ll need separate accounts for each to preserve their tax treatment.

📌 Carry comes with an integrated investment platform that you can choose to use instead of having to go and find a third party brokerage to open your Solo 401k accounts.

Step 6: Fund Your Solo 401k

You can fund your Solo 401k in two ways:

Rollovers are often the fastest way to build your balance. They do not count toward your annual contribution limits.

You can rollover funds and/or assets from any retirement account, including:

❌ The only retirement account you cannot rollover to a Solo 401k is a Roth IRA.

Step 7: Start Investing

Finally, you’re now ready to start making investments through your Solo 401k. 

These plans allow you to invest in any asset class you want, with only a few IRS restrictions The IRS does not specify which investments are allowed, but they do have a short list of prohibited investments. These include:

❌ Collectibles under IRC §408(m) (art, rugs, antiques, most coins, alcohol, etc.)

❌ Life-insurance contracts are not outright prohibited but are limited to “incidental benefit” amounts in a qualified plan.

❌ Certain S corporation stock (Solo 401k trusts cannot be S corp shareholders under IRC §1361(c)(6), unless held through specific qualified plans)

As long as your investment doesn’t fall into a prohibited category, it’s typically allowed. If you have any questions or concerns, you can always reach out to your plan provider to double check.

Here are some common investments made through a Solo 401k:

Wrapping Up

Whether you’re a freelancer, solopreneur, or small business owner with no full-time employees, a Solo 401k offers a powerful way to reduce your tax burden and grow retirement savings.

Setting up a Solo 401k is straightforward, but involves key administrative steps. Choosing the right provider can simplify the process and ensure long-term compliance.

📌 Ready to open your Solo 401k plan? Click here to get started.

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Disclaimer:

The Carry Learning Center is operated by The Vibes Company Inc. (“Vibes”) and contains generalized educational content about personal finance topics. While Vibes provides educational content and technology services, all investment advisory services discussed on this website are provided exclusively through its wholly-owned subsidiary, Carry Advisors LLC (“Carry Advisors”), an SEC registered investment adviser. The information contained on the Carry Learning Center should not be construed as personalized investment advice and should not be considered as a solicitation to buy or sell any security or engage in a particular investment, accounting, tax or legal strategy. Vibes is not providing tax, legal, accounting, or investment advice. You should consult with qualified tax, legal, accounting, and investment professionals regarding your specific situation.

The accounts, strategies and/or investments discussed in this material may not be suitable for all investors. All investments involve the risk of loss, and past performance does not guarantee future results. Investment growth or profit is never a guarantee. All statements and opinions included on the Carry Learning Center are intended to be current as of the date of publication but are subject to change without notice.

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