Potential client has ownership interests in a few management companies. Each company was set up to manage one operating company that has employees. Each management company receives 100% of its business from the operating company it manages. Client has no ownership of operating companies and management companies have no employees.
Each pairing is a management affiliated service group. Payments from operating pass through the management company to an equity holding company. Equity holding provides client with K-1 self employment income. This income reflects on 1040 SE.
The management companies are disregarded where the client has self employment income with regard to the management companies? 301.7701-2
Tracing the income to a company within an affiliated service group, does that designation attach to the income , precluding client from adopting a 1-man DB plan in his sole proprietorship with the net earnings? Or would the client sole proprietorship fall outside the affiliated service group, as the income comes from enough operating companies that the 50% management business is not met?
