Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
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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 |
Get the self-employed plan structure checked
The right plan for an owner depends on the entity, the payroll and whether anyone else is on the books, and an adviser can check the structure before a contribution is made that has to be unwound.
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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.