A client of mine has a small business that files as a Sole Prop. The business is 25 years old and does not have a retirement plan currently. He and his wife file a joint tax return every year and he reports the business income on a single schedule C. This year the business received a large payment (settlement) from a packaging supplier whose packaging damaged my clients products. As a result, the business will have a $175,000 more income than usual, and consequently, more profit. As a way to reduce this, my client has opened a Solo K and will make a 26k deferral into it as well a profit-sharing contribution at tax time. My question is: can we also open an account for his wife for whom no income was ever reported in the past. I’m thinking that the business qualifies as a Qualified Joint Venture? BTW, the original CA business license from 1995 has both of their names on it (if that has any relevance). Their accountant seems hesitant to recommend doing this because no income was every attributed to the spouse and all of a sudden they want to do so.

Thanks,

Dana Preis
Moneco Advisors