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SEP Contribution Allowable? becomes Controlled group mid year?


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Company A (a LLC 1065) is owned by  Owner 1& 2 from January 1 through August 31 of 2018.  They have one other employee. Company B is owned by  Owner 1 and two other unrelated people from January 1 through August 31. They have 20 employees.  As of September  1,   Owner 2 buys shares in Company B. 

At September 1, the ownership of both companies is as follows:  

Company A:  Owner 1 - 49%  Owner 2 - 51%  

Company B:  Owner 1 - 51%  Owner 2 - 40%  Other unrelated owners- 9%

So as of  September 1 - they are a controlled group - correct?  Ok  if so, the other question  Company A has is  " Can they make a SEP contribution for the period Jan 1 through August 31 - just for their employees of Company A? "

Any feedback, documentation,  cites, etc would be greatly welcomed.  Thanks!

 

 

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Sounds like you need to know if the transition rule applies to the SEP, and Company A. I don't actually know the answer. Usually coverage testing the the main concern, and I've never don't coverage testing on a SEP, I don't usually deal with SEPs. 

If you want more reading on the transition period rule, here is an article to start:

http://ferenczylaw.com/article-the-elusive-irc-section-410b6-transition-rule/

 

I'm a stranger on the internet. Nothing I write is tax or legal advice. 

I'd like a witty saying here, but I don't have any. When in doubt, what does the plan document say?

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