I have a client, a realtor, who would like to invest in rental properties through a solo 401(k). The problem: she has an employee, so I'm guessing that a Solo 401(k) is out of the question. Or is it? There are only the two employees and there will not be any more in the future.
Is there something she can do?
Is the person a w-2 employee or a 1099-misc independent contractor? If the latter, your client can set up a solo 401k if he/she has earned self-employment income and no other business with full-time w-2 employees.
If the person is a w2 employee and works less than 1000 hours per year (or starting in 2021 500 hours per year for 3 consecutive years ending in 2024), your client can still set up a solo 401k as described above.
If the person is a w2 employee and works 1000 hours or more per year, your client can't set up a Solo 401k unless the person becomes a 3% or more partner in the business.
If the person can't set up a Solo 401k, he or she can still invest in rental properties through an IRA LLC.