Even though a qualified plan can only be established by an employer (IRC Sec 401(a)), a sole proprietor can establish a Keogh plan, and so can a partnership. Only a sole proprietor or a partnership can set up a Keogh plan. A common law employee cannot, and neither can a partner (Reg § 1.401-10(e)(1)).

For purposes of establishing a Keogh plan, an individual who owns the entire interest in an unincorporated trade or business is treated as his own employer. And a partnership is treated as the employer of each partner who is considered to be an employee under IRC Sec 401(c)(1), IRC Sec 401(c)(4). Therefore, a sole proprietor is considered to be his own employer, and the partnership is considered to be the employer of each of the partners. (Reg § 1.40110(e)(1))

Directors' Fees are Self-Employment Income - Since directors' fees are self-employment income (Rev Rul 72-86), a taxpayer who is both an officer and director of the same corporation and is covered as an employee under the corporation's pension plan, may set up a Keogh plan for the separate fees he receives for acting as director (Letter Ruling 7839059).