Entrepreneurs and small business owners have several choices for what type of retirement plan they want to set up. For those that are successful, it often comes down to a choice between the self-employed (SEP) IRA and a solo 401K. Both allow participants to contribute a generous amount each year (up to $53,000 for 2015). However, there are some important differences. Here is a closer look at each plan:

SEP IRA: SEP IRAs are ideal for entrepreneurs that have no intention of contributing more than 25% of their W-2 income or 20% of their net self-employment income (up to the annual maximums) each year. These accounts are relatively easy to set up, and on balance, there are lower maintenance fees and less administrative work required to maintain the account. Perhaps the biggest advantage with a SEP IRA is its flexibility in regards to contributions; you can contribute as often (or as seldom) as you want throughout the year, as long as you stay within the aforementioned contribution limits.

Solo 401K: Solo 401Ks are ideal for entrepreneurs who are more aggressive savers who plan on contributing substantial amounts into their accounts on a regular basis. Though the annual contribution limit is the same as with the SEP IRA, solo 401K owners can potentially save more money at the same income level; this is because individuals can contribute up to 100% of their first $18,000 in W-2 compensation or net self-employment income (this figure goes up to $24,000 if you are age 50 or older).

In addition, solo 401K account owners may take loans of up to 50% of the account value (up to a maximum of $50,000), and individuals ages 50 and over are allowed to contribute a maximum of $59,000 for 2015, $6,000 higher than with a SEP IRA. The main drawback to solo 401Ks is that, depending on the plan, there are hidden fees and administrative costs to deal with. You are also supposed to make “substantial, recurring payments”; otherwise, the IRS could tax and penalize your plan.

Solo 401Ks and SEP IRAs can both be good retirement plan options for small business owners. The right choice will depend on how aggressively and consistently you want to save and if you want to have the option of a tax free loan up to half the value of the plan. With either account, things get complicated once you hire an employee. Under both plans, you must provide the same retirement benefits to your employees as you are receiving. For further details about SEP IRAs, 401Ks, other retirement plans and the tax implications of each, speak with your local tax accountant.