Chances are if you’re reading this you’ve probably heard of a solo 401k, which our friends at the IRS call a “one participant 401k.” But what about solo 401k eligibility? Before you waste 5 minutes of your life reading my masterpiece, I’d like to let you know: if you’re not self employed you aren’t eligible for a solo 401k.I know, some people just got their hearts broken. It’ll be okay, trust me. You’ve got options. And you can read about the Roth IRA and conventional IRAs/401ks from our previous posts on the subjects. Anyway, for those of you who are self employed and interested in learning more about solo 401ks, read on.Solo 401k BasicsThe solo 401k was born out of the Economic Growth and Tax Relief Reconciliation Act of 2001, or EGTRRA. The idea is to give kick-ass entrepreneurs who’d rather work for themselves than “the man” an opportunity for tax-deferred retirement savings.With that introduction out of the way, you should know there are some limitations to solo 401k eligibility.What Are The Limitations Of a Solo 401k?A solo 401k is limited to companies with one employee (you as the owner) although if you have a spouse then he or she can also contribute to the plan. Partners or shareholders can be included in the plan as well.Your company can have part-time employees who are excluded from the plan, as long as they work less than 1,000 hours a year, or belong to a union or are non resident aliens.But if your company takes on full time employees who aren’t married to you (the boss), then your solo 401k will unfortunately have to be converted to an old-school 401k plan.The solo 401k plan is available to anyone who is already a business owner or who will be establishing a sole proprietorship and does not have, or plan to have, full time employees.The solo 401k is great for consultants, freelancers, home businesses, and independent contractors. So now I bet you want to know about the contribution rules huh. As a good host, I must oblige my audience.Solo 401k Contribution RulesIf you’re under the age of 50, you can make a max contribution in the amount of $18,000. This amount can be made before or after tax.On the profit sharing side, your business can also make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to $36,000. That comes out to a combined max of $54,000.Note: If you’re over the age of 50, the contributions are the same, except you can contribute $6,000 extra.The 2 Kinds Of Solo 401k ContributionsThe solo 401k plan accepts two types of contributions: salary deferrals and a profit sharing contribution. Both are tax deductible and grow tax-deferred until withdrawals.You can withdraw money from your solo 401k penalty free after you turn 59 1/2. Withdrawals after age 59 1/2 are taxed as ordinary income. Withdrawals must begin at the age of 70 1/2–but this rule doesn’t apply if you go Roth style.To fund a solo 401k, you can rollover funds from your previous retirement plans, IRAs etc, by setting up a Trust account for the solo 401k and directly transferring your funds from the old custodian to the trust bank account.A Trustee needs to be designated to hold the assets of your solo 401k, preferably you. However, if you do serve as Trustee, you cannot legally benefit directly from the trust, enter into a transaction with the trust, or use the trust as your personal fund.Since a solo 401k is an IRS qualified retirement plan, it has to have a written 401k plan document that establishes the provisions of the plan. It’s a lengthy document which will explain how the plan works and operates.For example, the plan document will explain how you are able to borrow up to 50% or $50,000 (whichever is greater) from your solo 401k tax free, and literally for free. You pay interest, but the interest is paid into your account, so you’re really paying yourself.What Are The Technical Requirements For a Solo 401k Plan?Great question! To be eligible for a solo 401k plan you must meet two eligibility requirements:The “presence” of self employment activity. (You must be self employed.)The “absence” of full time employees. (It’s gotta be all you, baby!)Allow me to explain these two lines in detail.The Presence of Self Employment ActivityThis basically means you should be the owner/operator of one of the following: sole proprietorship, LLC, C Corporation, S Corporation, or Limited Partnership where the business intends to generate revenue for profit and make contributions to the solo 401k plan.There’s no set amount of revenue for profit you should be generating. In most cases the IRS will consider you eligible if your business is legitimate and run with the intention of generating profits. You can be self employed either part time or full time, and even have another job somewhere else.You can also participate in an employer’s 401k plan alongside your solo 401k. But if you choose to do this, your contribution limits will not be raised. (So a few thousand dollars contributed to your employer 401k will mean a few thousand dollars less you can contribute to your solo 401k.)The Absence of Full-Time EmployeesAs you already know, a solo 401k is available to self employed individuals or small business owners who have no other full time employees.The following types of employees are excluded from solo 401k coverage:Employees under 21 years of age.Employees who work less than 1000 hours a year.Union employees.Non-resident alien employees.If you have full-time employees age 21 or older (other than your spouse) or part-time employees who work more than 1,000 hours a year, you will have to include them in any plan you set up. You can get around this by employing independent contractors.Once you have a solo 401k, you’ll be able to invest in anything from real estate to cryptocurrency and more!