Retirement Plans for Small Business Owners (SEP, Solo 401k, SIMPLE)
Retirement plans are one of the biggest legal tax shelters left for small business owners. The right plan depends on whether you have employees, how much you want to contribute, and how much administration you can tolerate.
Solo 401(k)
For sole proprietors and owner-only businesses (spouse allowed).
2026 limits: $23,000 employee deferral (+$7,500 catch-up if 50+) plus employer contribution up to 25% of comp — total capped at ~$70,000.
Roth option available. Can borrow against the plan (loans up to $50,000).
No plan required if under $250,000 in assets; Form 5500-EZ required once over.
SEP IRA
For any business size — sole prop through large employer.
2026 limit: 25% of compensation, capped at ~$70,000 (employer contribution only — no employee deferrals).
No annual filing requirements. Extremely simple to set up.
Downside: if you have employees, you must contribute the same percentage of comp for them as for yourself.
SIMPLE IRA
For businesses with 100 or fewer employees.
2026 employee deferral limit: ~$16,500 (+$3,500 catch-up if 50+).
Employer must match 3% of comp or contribute 2% for all eligible employees.
Lower contribution ceiling than Solo 401(k) or SEP but simpler than a full 401(k).
Full 401(k) with employees
Once you have employees and want employees deferring their own income, a full 401(k) makes sense. Modern low-cost providers (Guideline, Human Interest, Employee Fiduciary) run these for $100–$300/month plus per-participant fees.
Safe Harbor plans avoid annual discrimination testing headaches.
How to choose
Solo, no employees, want maximum contribution: Solo 401(k).
Solo, no employees, want minimum admin: SEP IRA.
Small business with employees, want simple plan: SIMPLE IRA.
Growing business with employees who want to defer: Safe Harbor 401(k).
A quick disclaimer
This article is general information for Montana small business owners, not tax, legal, or accounting advice for your specific situation. Rules change, and how they apply depends on facts we don't know about you. Before acting on anything you read here, talk to a qualified professional. If you're a Montana business owner and want a real conversation about your books, payroll, or tax, that's what Marlow Accounting is here for — call 406-290-1214 or schedule a discovery call.