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You can open a SEP IRA if you are either a sole proprietor or an LLC. With a SEP you can contribute up to 25% of your "net" schedule C income up to I believe $41K (in 2004). The calculation of net self employment income is described here:

The 401(k) contribution limit in 2004 is I believe the lesser of $13,000 and 25% of your W2 pay.

If you have income from both sources I believe that you can contribute to both retirement plans. Say that you had $50K of W2 income and $50K of net schedule C (i.e. 1099) income. You could contribute $12,500 to the 401(k) -- 25% of $50K which is less than $13,000. You could contribute $12,500 to your SEP -- 25% of your net schedule C income.

Another option is to create a single participant 401(k) which can allow you to contribute more per year, you can max out your employee contribution and also contribute from your company (which I believe can now be incorporated or unincorporated). More info here:

This gets complex and I would consult with a CPA in your state before embarking on a plan of action.

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