SEP IRA LLC
* Two business partners (Partner A and B) set up an LLC in Delaware
* LLC ownership is 50% for each partner
* The LLC has never established a retirement plan
* The LLC does “not” elect to file as a corporation
* The LLC issues a K-1 for $20k (classified as “guaranteed payments”) to each partner for services that Partner A and B provided to the LLC.
* My understanding is that the $20k would be considered self employment income to each partner.
Partner A wants to “personally” establish a SEP IRA in order to defer taxation on his share of the $20k from the LLC.
1) Can Partner A, personally establish a SEP IRA, without regard to Partner B or must the LLC establish the SEP IRA?
2) If the LLC must establish the SEP IRA, must an equal amount be contributed to each partner’s SEP IRA, can one partner choose not to participate in the SEP?
Permalink Submitted by Martin Helmer on Thu, 2008-04-03 21:36
1) Partner A can’t establish the SEP; the partnership can.
2) If both partners meet the eligibility requirements, each must receive a contribution under the same formula. This usually results in each person receiving the same percentage of compensation.
For 2008, have you considered a SIMPLE IRA?