Updated July 28, 2026. Quick answer: If you own a second business that has employees, those employees are treated as yours for coverage, nondiscrimination, the contribution limits and top-heavy. IRC §414(b) and §414(c) apply single-employer treatment across sections 401, 408(k), 410, 411, 415 and 416 — and because that list includes 408(k), switching to a SEP does not escape it either.
The provision, and the detail in it that matters
IRC §414(c) is the one that catches unincorporated owners: “for purposes of sections 401, 408(k), 408(p), 410, 411, 415, and 416 … all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer.” §414(b) does the same for corporations, and §414(m) extends it to affiliated service groups — professional practices that are functionally intertwined without common ownership.
Read the section list again: it includes 408(k), which is the SEP provision, and 408(p), which is the SIMPLE. The common advice when a solo 401(k) breaks is to move to a SEP. That does not help here. The trap is upstream of the plan type.
What it looks like in practice
| Situation | Result |
|---|---|
| Consulting LLC with no staff, plus a rental business with no staff | Generally fine — no employees to cover |
| Consulting LLC with no staff, plus a retail business with six employees | The six count. No one-participant plan in either entity |
| Two professional practices, no common ownership, but sharing services | §414(m) may combine them anyway |
One carve-out worth knowing before you assume the worst
The SECURE 2.0 Act narrowed family attribution in specific ways — community property is disregarded for this purpose, spousal cross-attribution is limited, and attribution through a minor child alone will not combine two corporations. If your second business is owned by your spouse rather than by you, the answer is genuinely different and genuinely technical — that is a question for someone who can see both ownership structures, not for a page.
Every dollar limit in this area is indexed and changes annually. The figures printed in the Code itself — $40,000 for the defined-contribution limit, $160,000 for the defined-benefit limit, $15,000 for elective deferrals — are 2001 and 2005 base amounts that will never be updated in the statute; IRC §415(d) and §402(g)(4) do the adjusting. Get the current year’s figures from the IRS cost-of-living notice for that year rather than from any article, including this one. Nothing on this page states a dollar amount for that reason.
Sources
IRC §410(a)(1)(A) and §410(b)(1); §401(a)(4); §401(k)(2)(D) as amended by the SECURE 2.0 Act §125; §416(g)(4)(H); §414(b), (c) and (m); IRS One-participant 401(k) plans and IRS Notice 2024-73.
This states what the cited authority says. It is not tax advice, and retirement-plan design turns on facts about your business and your other entities that no page can see. Every dollar limit referenced here is indexed and changes annually.